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AMC Releases Strong Results as People Spend More on Entertainment
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AMC Releases Strong Results as People Spend More on Entertainment

AMC Entertainment (NYSE: AMC) generated robust revenue growth and a lower-than-anticipated loss in Q1’22 as moviegoers were back in theaters, thanks to some blockbuster movie releases like Spider-Man: No Way Home and The Batman.

The COVID-19 pandemic significantly hurt theaters and other entertainment avenues. However, with easing of restrictions and rapid vaccinations, consumers are opening their wallets for movies and other forms of entertainment.  

AMC shares were up 2.6% in extended trading hours on Monday, May 9. After being caught up in meme stock frenzy last year, AMC shares are down nearly 54% year-to-date.

Q1 Results in Detail

AMC CEO Adam Aron called Q1’22 the “strongest first quarter in two full years” as revenue grew over five times to $785.7 million from $148.3 million in Q1’21, surpassing the Street’s consensus estimate of $743.4 million.

AMC saw 39 million guests at it its theaters, up from nearly 6.8 million in the prior-year quarter. That said, AMC CFO Sean Goodman pointed out that Q1 revenue and attendance were still well below pre-pandemic levels.   

Solid revenue recovery helped the company bring down its adjusted loss per share to $0.52 from $1.42 in Q1’21. Analysts were expecting a loss per share of $0.63.  

The Story Ahead

Based on movie releases lined up for the months ahead, AMC currently expects its Q4 revenue to reach or “get close” to pre-pandemic levels.

AMC is optimistic about continued recovery helped by recent releases like Dr. Strange in the Multiverse of Madness, and upcoming movies like Top Gun: Maverick, Jurassic World Dominion, Lightyear, Thor: Love and Thunder, and Black Panther: Wakanda Forever.

Also, AMC expects its cash burn to improve sequentially as the year progresses, with Q2 being better than Q1, but “still relatively weak,” according to Goodman. It expects to generate positive operating cash flows by the fourth quarter.

Wall Street’s Take

B. Riley Financial analyst Eric Wold acknowledged AMC’s upbeat performance as the company continues to “capitalize on strengthening theatrical attendance trends, improving box office market share, and elevated per capital spending levels.”

Though Wold remains positive about improving attendance and box office performance this year and in 2023 as well, he is concerned about persistent uncertainties “around the overall film slate, complete demographic recovery, and inflationary/labor headwinds.”

Consequently, the analyst did not significantly change his 2022 and 2023 adjusted EBITDA estimates and maintained a Hold rating with a price target of $16.

Overall, the Street has a Moderate Sell rating on AMC stock based on two Holds and one Sell. At $11, the average AMC price target implies further downside potential of 12.14% from current levels.

Conclusion

AMC’s business rebounded considerably in the first quarter, and the company is optimistic about continued recovery through the year backed by appealing movie releases. That said, uncertainty associated with COVID-19 and the potential impact of inflation on consumer spending could further impact shares in the months ahead.

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