Shares of AMC Entertainment are down another 6% in Wednesday’s pre-market after tanking 13.2% on Tuesday as the movie theatre operator warned that it might face a cash crunch by the end of this year, or early 2021. The warning comes as the coronavirus pandemic led to the temporary closure of movie theatres earlier this year.
“Given the reduced movie slate for the fourth quarter, in the absence of significant increases in attendance from current levels or incremental sources of liquidity, at the existing cash burn rate, the Company anticipates that existing cash resources would be largely depleted by the end of 2020 or early 2021,” AMC (AMC) said in a SEC filing.
The company is exploring several potential sources of liquidity, including additional debt and equity financing, renegotiations with landlords related to lease payments, potential asset sales, and joint venture with business partners, according to the filing.
Among other ongoing developments, AMC said it has resumed operations of approximately 83% of its US theatres with a limited capacity of between 20% and 40%. The company also said that there are very few movies that will be released for the remainder of 2020 as major movie releases that were scheduled for 2020 release have been rescheduled for 2021 or will be streamed directly on online platforms. (See AMC stock analysis on TipRanks).
In a note to investors released on Oct. 13, B.Riley Financial analyst Eric Wold maintained his Hold rating on the stock with a price target of $4.50 (27.1% upside potential). Wold said that “should the major US markets yet to reopen given the green light in the near-term, both the reaction to the company’s share price and ability to secure capital could be extremely positive.”
Currently, the Street is also sidelined on the stock. The Hold analyst consensus is based on 4 Holds and 1 Sell. Given the year-to-date share price decline of 51.1%, the average price target of $5.17 implies upside potential of about 46.1% to current levels.
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