Theater chain AMC Entertainment (NYSE:AMC) is set to report its second quarter Fiscal 2023 results on August 8 after the market closes. Wall Street expects AMC to post an adjusted loss of $0.04 per share on revenues of $1.29 billion. The estimates imply a decent improvement over the comparative quarter’s performance. In Fiscal Q2 2022, AMC posted an adjusted loss of $0.12 per share on revenues of $1.17 billion.
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Going by the strong slate of movie releases during the to-be-reported quarter, AMC is likely to surpass analysts’ expectations. Blockbuster movies such as The Super Mario Bros., Guardians of Galaxy Vol.3, and Spider-Man: Across the Spider-Verse were some of the Hollywood top-grossing movies during the quarter. The recent blockbuster hits from Barbie and Oppenheimer have also resulted in an uptick in AMC’s theater visitations. However, the impact of “Barbenheimer” will be visible only in AMC’s third-quarter numbers.
Having said that, the theater chain continues to be saddled by liquidity issues. CEO Adam Aron’s latest bid to raise finances by converting the AMC Preferred Equity (APE units) into common stock was rejected by a Delaware court last month. The transaction even included a 10-for-1 reverse stock split, which has been denied. The company has consistently urged the need to raise additional cash or else risk the possibility of going bankrupt, similar to the recent bankruptcy of Cineworld cinema.
Is AMC a Buy or Sell, According to Analysts?
Despite the heavy slate of hit movies this year, analysts remain cautious about AMC stock’s trajectory. Analysts believe that movie hits and nearly-full theaters may not be enough to salvage the theater chain. AMC needs more cash and needs it soon to survive.
Recently, Wedbush analyst Alicia Reese reiterated her Sell rating on AMC stock. Her $2 price target implies that AMC shares have over 60% downside potential currently. Reese noted that “in spite of recent box office successes, AMC is instead concerned with its cash requirements, APE shares falling, and the writers’ and actors’ strikes persisting.”
Other analysts also echo similar opinions toward AMC stock. On TipRanks, AMC has a Moderate Sell consensus rating based on two Holds and three Sell ratings assigned in the past three months. The average AMC Entertainment stock price target of $2.16 implies 57.8% downside potential from current levels. Meanwhile, AMC stock has gained 30.28% year-to-date.
Insights from Options Trading Activity
TipRanks now presents options activity to help investors plan their trades ahead of earnings releases. Options traders are pricing in AMC stock to move by +/-16.21% after reporting earnings. Last quarter, the stock declined marginally by 0.51% following the Q1-2023 results, despite the company reporting a narrower-than-anticipated loss and outpacing revenue expectations.
The anticipated earnings move is determined by computing the at-the-money straddle of the options closest to the expiration after the earnings announcement.
