On the back of its fourth-quarter earnings results this week, AMC Entertainment Holdings Inc. is “hamstrung” by its high level of debt and rent obligations, according a Macquarie analyst.
“AMC remains hamstrung by high leverage with interest (>$300m) and deferred rent (~$100m),” wrote Macquarie’s Chad Beynon in a note released Thursday. Also citing the current business outlook, Macquarie maintained its underperform rating for AMC
AMC,
while lowering its price target to $4 from $5.
Of six analysts surveyed by FactSet, three have a hold rating and three have a sell rating on the stock.
Related: AMC delivers revenue beat helped by Taylor Swift and Beyoncé, yet stock drops
Since the start of 2023, AMC has repaid $101 million of deferred rent, the company said when reporting its results this week. The movie-theater chain’s deferred-rent balance at the end of 2023 was $56.3 million, which it plans to reduce by another approximately $20 million by the end of 2024.
In its note, Macquarie cited concerns as the movie-theater industry continues its postpandemic recovery. “Theatrical stocks underperformed in ’23 after a very difficult ‘22 and remain ~60% off of prepandemic levels,” wrote Beynon. “Unfortunately, the outlook for ‘24 has questions again following the Hollywood strikes and slower postpandemic core demand.”
Yet Macquarie believes that revenues should improve beyond the first quarter. “Bottom line: We’re taking a conservative approach toward our estimates but believe there could be upside opportunities in 2H24,” Beynon added.
Related: AMC rode the Taylor Swift and Beyoncé wave, but a ‘bumpy 2024’ is now under way, Wedbush says
AMC’s fourth-quarter results were boosted by the performance of Taylor Swift and Beyoncé’s concert films. Speaking during AMC’s conference call to discuss the results, Chief Executive Adam Aron said the company is in touch with other “world-class musical artists” for movies of their own in 2024 and 2025.
Aron also acknowledged that 2023 did not live up to its full potential, citing the months of writers and actors strikes that “crippled” Hollywood. But he said that the box office will continue to strengthen, adding that 2025 could be “a gangbuster year,” both for the industry and AMC as a company.
The CEO also pointed to the eagerly-anticipated sci-fi epic “Dune: Part Two,” which opened Friday. “We’re expecting it to be a big and successful movie,” he said.
Related: AMC’s stock slides after Q4 results, on pace for biggest decline in four months
AMC shares were up 3.2% Friday, after ending Thursday’s session down 13.4% to snap a four-day winning streak. The stock on Thursday registered its largest daily percentage decline since Nov. 9, 2023, when it fell 13.68%. AMC shares are down 35% in the last three months, compared with the S&P 500 index’s
SPX
gain of 11.5%.
But AMC’s valuation is starting to look “more reasonable,” Benyon wrote, with shares trading 8.5 times Macquarie’s 2025 estimate of earnings before interest, taxes, depreciation and amortization, or Ebitda. The analyst compared the stock favorably to rival Cinemark Holdings Inc.: “This compares to [Cinemark] at 6.5x. We look to get more constructive should valuation fall more in-line with peers, improving its risk/reward profile.”
Cinemark
CNK,
shares were down 2.6% Friday and up 16.1% over the last three months. Shares of in-theater advertising company National CineMedia Inc.
NCMI,
were up 2.4% Friday, and have gained 5.3% over the last three months.
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