AMC Stock has a lot to prove this week
The earnings season has been less than kind lately, and it is against this unfortunate backdrop that AMC Entertainment Holdings (AMC -6.33%) throws the spotlight on its first quarter results shortly after the close on Monday. Investors in the country’s leading multiplex operator can enjoy a break. The stock has halved in 2022 and shares have fallen 81% since peaking in June last year.
A solid financial update can help reverse the negative trend, but it’s no easy task for AMC. Box office returns so far this year have been poor, and in this climate of rising rates, it will be difficult to raise funds to offset future financial shortfalls. There’s still time for a Hollywood ending worthy of applause for AMC shareholders, but there are also plenty of subplots that need to be resolved for that to happen.
Doctor Strange in the Multiverse of Madness has a strong weekend at the multiplex, but 2022 has been otherwise forgettable so far. Domestic ticket sales through Friday night are down 45% this year from the same point in 2019. Analysts don’t see revenue returning to AMC’s level of three years ago anytime soon, and pros Wall Street forecast losses for the next few years. years.
Monday’s report should still contain positives in the unfavorable three-year compositions. Analysts are modeling $734.4 million in revenue for the first three months of the year. Despite grim comparisons to 2019 — the last pre-pandemic year for the industry — the primary target is only 39% lower than where AMC landed for the same three-month period three years ago. AMC is gaining market share in this shrinking pie. The multiplex operator is also seeing an increase in high-margin concession stand sales per customer.
AMC is also expected to post a much lower loss per share than in the first quarter of 2019. The $0.63 per share investors are expecting is half of 2019’s per share deficit, but there is a big catch. AMC now has five times as many shares outstanding, so the actual loss should be considerably higher.
The challenges remain for AMC and all of its other movie titles. Box office receipts in this country reached a new high in 2019, but the peak in terms of the actual number of tickets sold was 2002. Ticket price inflation is offsetting the drop in consumer demand which is has occurred over the past two decades, and the pandemic has accelerated the detachment. Studios now have premium streaming services to power new content, and many moviegoers can stay home for all but a few releases a year.
This may not always be the case. Doctor Strange in the Multiverse of Madness kicks off a wave of big theatrical releases throughout the summer reveal season. AMC could also announce new initiatives that open up new revenue streams, or at least make it less reliant on feature film ticket sales.
AMC could also appease investors concerned about a confusing investment in a gold mining penny stock in March and strong insider selling in recent months. It may also ease fears about its wobbly balance sheet. AMC still has more than $9 billion in net debt, and with rates rising — and its obligations falling — new funding won’t come cheap. It’s not like AMC could turn to its now-disadvantaged stocks to raise capital.
The good news is that with a fifth of its outstanding shares flagged short, a squeeze is possible if AMC has good news to offer this week. All eyes are on the screen. AMC needs a Monday afternoon financial blockbuster.