Last year, AMC (AMC) benefited immensely from its status as a meme stock, with the shares’ ascendance having little to do with rickety fundamentals. However, on Tuesday, the company showed concrete evidence that fundamentals might be improving after all.
AMC announced preliminary 4Q21 results which were far better than any other quarter’s display since the pandemic’s onset.
Revenue is expected to hit $1.17 billion, ahead of the $1.09 billion Wall Street had predicted, while EBITDA is anticipated to come in between $146.8 million and $151.8 million. Consensus had that figure hitting $82 million.
The most important takeaway from the announcement, according to Wedbush analyst Alicia Reese, is that cash “only declined by $20 million sequentially after sizeable deferred lease and cash interest payments in the quarter.”
Additionally, the quarter amounted to the first one since the pandemic started in which the company delivered positive free cash flow, and Reese believes that relative to just a week ago, AMC’s “positioning” for debt refinancing should improve.
There are other elements which are encouraging. With attendance rebounding strongly in Q4, Reese is “optimistic” about the exhibition industry, anticipating attendance to “meaningfully improve” throughout 2022 (following a lull in Q1). In fact, the analyst sees the domestic industry box office rebounding to roughly 80% of pre-pandemic levels, and by 2023, revenue should approach pre-pandemic levels too.
AMC stock has been on the backfoot recently, wiping out most of last year’s humongous gains. Reese puts the “precipitous decline” down to shareholders loss of faith after senior management offloaded a big chunk of their shares.
Now the analyst thinks “many of the remaining retail shareholders are more faithful, and will be more flexible with management.” However, while Reese believes “AMC is positioned to gain market share,” she also notes its “significant debt and need to refinance in the near-term remain an overhang.”
So, down to business, what does this all mean for investors? Reese maintained an Underperform (i.e., Sell) rating and sticks with a $7.5 price target, suggesting shares are still overvalued by 51%. (To watch Reese’s track record, click here)
Does the Street concur? Basically, yes. The stock has a Moderate Sell consensus rating, based on 3 Holds and 2 Sells. The average price target is only slightly less pessimistic; at $8.17, the shares are expected to be changing hands for ~47% discount a year from now. (See AMC stock forecast on TipRanks)
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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.
