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AMC Entertainment reported the fourth quarter on Wednesday.
Angela Weiss / AFP via Getty Images
Cinema companies hope that the spread of vaccinations and weakened restrictions on public gatherings will help their businesses return to a gloomy 2020, but not all chains are alike.
AMC Entertainment
Holdings (ticker: AMC), the largest US theater operator, has raised more than $ 1 billion in cash since the fall through stock sales and convertible debt deals to build a cushion until business returns to normal. But that hurts, according to Richard Greenfield of LightShed Partners.
The analyst started AMC shares at a Sell on Wednesday, setting a 1-cent price target, saying the company’s multiple is not justified given its debt and cash flow.
The company is likely to discuss its expectations about the impact of mass vaccinations and the reopening of the economy when it reports its earnings on Wednesday night after the clock. Last month, CEO Adam Aron said the reopening of movie theaters in New York – with some restrictions related to Covid – ‘is another important step in restoring the health of the movie theater industry and our company’. In January, Aron expressed the need to file for bankruptcy after the company raised more cash.
AMC shares, trapped in the Robinhood retail frenzy, rose 13.2% on Wednesday in volatile trading. But they lost momentum and rose just 2.4% to $ 10.75 with a recent check. They have increased by about 400% so far this year compared to the
S&P 500’s
4% year-to-date profit.
According to Greenfield’s calculations, at Tuesday’s closing price of $ 10.50, the AMC share trades more than 15 times the estimated 2022 adjusted earnings before interest, tax, depreciation and amortization, or Ebitda. And that Ebitda ‘from that point on is in secular decline, with no free cash flow and more than 8x debt-to-EBITDA’, he said in a note.
He calls the shares ‘dramatically overvalued’.
Analysts followed by FactSet expect AMC to report a loss of $ 3.24 per share for the fourth quarter for the quarter on an anemic income of $ 142.3 million. For the full year 2020, the forecast for a loss of $ 31.18 per share on sales is $ 1.2 billion.
For the full year 2019, AMC reported a loss of $ 1.08 per share on sales of $ 5.55 billion. In 2019, AMC reported $ 771 million in adjusted Ebitda, Greenfield said, but he predicted that the same benchmark for 2022 would struggle to reach $ 600 million.
It’s not just a continuing reluctance of some moviegoers to return to personal theaters without knowing the vaccine status of those around them, he argued. Hollywood studios have changed consumer habits by releasing new movies by on-demand, home-streaming and push-back or narrowing the window of theatrical shipments.
This means that it is difficult to predict the box office sales for AMC’s local and international screens. Greenfield estimates a high single-digit profit in 2019 for AMC’s domestic sales in 2022 (it ignores 2020 and 2021 due to the pandemic). But he adds, “it honestly feels like it could be significantly worse.”
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