what happened
Shares of AMC Entertainment (NYSE: AMC) fell 7% on Monday after Citi analyst Jason Bazinet issued a stern warning to the company’s investors.
Approximately
Bazinet on Tuesday reiterated its sales rating on the shares of the theater operator. He sees AMC shares fall to $ 2 a share. Bazinet’s price forecast therefore represents potential losses for shareholders of approximately 85% of the current price of almost $ 13.
Citi analysts think you should sell your AMC Entertainment shares. Image Source: Getty Images.
Bazinet acknowledged that AMC’s efforts to raise cash through equities and debt sales made it likely to survive the coronavirus pandemic. He also noted that the recent reopening of theaters in New York and California will be beneficial to the hopes of AMC. However, Bazinet argued that AMC’s inventory was “overvalued at the prevailing levels.”
Now what
According to Bazinet, it is difficult to claim that AMC’s share price is justified by the fundamental value of its business. Although it was necessary to raise cash, the share and debt offer diluted shareholders and increased the interest payment requirements. This will make it challenging for AMC to deliver sufficient earnings per share to support the current share price. While Bazinet’s $ 2 price target may seem low, it’s probably directionally correct.
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