Leading theater chain exhibitor AMC Entertainment Holdings, Inc. (NYSE: AMC) recently revealed that it has acquired seven properties from Bow Tie Cinemas in Connecticut, upstate New York and Annapolis, MD.
Following the news, shares of the company gained marginally to close at $17.51 in Tuesday’s extended trading session. The stock, however, declined 6.9% during the normal trading hours.
Strategic Impact
With lockdown measures and restrictions almost non-existent now, theater chains have started witnessing heightened occupancy rates. To that end, AMC’s move to strengthen its portfolio, with these properties in prime locations like upstate New York and Annapolis, MD, bodes well for the company after a tough couple of years.
The patrons at these theaters will gain access to AMC’s loyalty and subscription service, AMC Stubs. Notably, three out of four theaters in Connecticut will open by the end of next week, while the remaining theaters are expected to open by April end.
Management Commentary
The CEO of AMC, Adam Aron, said, “Our theater acquisition strategy makes AMC a better and stronger company as we move forward on our glidepath to recovery. Acquiring these locations is especially notable for our expansion in Connecticut, where we are more than doubling our presence. We are encouraged to bring the magic of AMC to more and more theaters across the country, given our mid-2021 acquisitions of AMC The Grove 14 and AMC Americana at Brand 18, both in the Los Angeles market, continue to rank among the 30 highest grossing movie theaters in the entire United States since joining up with AMC.”
Stock Rating
Consensus among analysts is a Moderate Sell based on three Holds and two Sells. AMC’s average price target of $9.83 implies downside potential of 43.6% from current levels. Shares have gained 97.1% over the past year.
Hedge Funds’ Confidence
TipRanks’ Hedge Fund Trading Activity tool shows that hedge fund confidence in AMC is currently Negative. Moreover, the cumulative change in holdings across the three hedge funds that were active in the last quarter was a decrease of 40,500 shares.
Conclusion
AMC’s strategic move to increase its theater count is likely to be beneficial for the company. However, rising inflation concerns are expected to hurt its patrons’ discretionary spending power, which, in turn, can adversely affect its revenues again.
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