Earnings season is not quite over yet, and today following the markets’ close, one of the retail crowd’s favorites will step up to deliver its latest quarterly statement.
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AMC Entertainment (NYSE:AMC) will post Q4 earnings against an improving fundamental backdrop, says Wedbush analyst Alicia Reese. “Theatrical exhibition is on the path to normalization,” Reese explained, “with an improving release slate in 2023.”
Reese’s “conservative estimates” for 2023 call for box office revs to see a 17% increase compared to 2022, although still down by 24% vs. a pre-Covid 2019. This is on the back of a 64% year-over-year uptick in 2022 (down 35% vs. 2019).
With its huge network of premium large format screens, AMC has plenty of cash to keep on operating through an improved theatrical environment in 2023 while at the same time it chips away at its “massive” debt balance. And as competitors falter, Reese thinks AMC will most likely “continue expanding with high-quality screen acquisitions as they become available.” At the same time, to drive new incremental revenue streams, the analyst expects the company will “dip into various new business ventures.”
Those are the positives and from there on in, Reese’s take is more muted. As for what to expect from the fourth quarter, Reece is below the Street on all the major metrics. The analyst sees revenue hitting $974 million compared to consensus at $1.01 billion; Reece expects flat adjusted EBITDA while the Street has $18 million and on the bottom-line, her EPS forecast of $(0.22) also falls shy of consensus at $(0.19).
While Reece has low expectations, she points out that AMC’s legions of retail fans place a much higher value on the shares than on those of peers, and therefore she values AMC at a “premium multiple relative to its pre-COVID historical range.” Nevertheless, that doesn’t help the case much as she still considers them way overvalued and continues to see “downside risk” from here.
Accordingly, Reece rates AMC shares an Underperform (i.e., Sell), while her $2 price target suggests the shares will be changing hands for a 73% discount a year from now. (To watch Reece’s track record, click here)
Elsewhere on the Street, with an additional 2 Holds, the stock receives a Moderate Sell consensus rating. The $3.25 average target is higher than Reece will allow but still implies shares will lose 57% of their value over the coming year. (See AMC stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
