Can AMC stock shoot higher after Q4 earnings?

AMC stock is benefitting from the return of cinemagoers post-pandemic, but analysts are still wary about its meme stock status.

Cinema operator AMC Entertainment [AMC] is set to report a 621.08% surge in year-over-year revenues and a 93.97% rise in earnings per share when it reports its fourth-quarter (Q4) earnings on 1 March.

AMC expects revenues of $1.17bn with a net loss of between $194.8m and $114.8m. That compares with a loss of $946.1m this time last year. According to analysts at Zacks Equity Research, the group will report an earnings loss of $0.19 per share.

The main driver has been the reopening of its 950 movie theatres and 10,500 screens across the globe following the easing of Covid-19 restrictions.

Macquarie analyst Chad Beynon said in a note sent to Opto that AMC will have been boosted by a 51% increase in US box office admissions in the quarter. Beynon said AMC held or slightly gained its admission share as cinemagoers flocked to see movies such as Spider-Man: No Way Home.

AMC stocks drop from 2021 highs

The AMC Entertainment share price rocketed higher from around $9.18 in early March 2021 to $62.55 in early June that year after it benefitted from being a so-called ‘meme stock’, bolstered by groups of retail investors on social media. This was despite lockdowns keeping people indoors and switching on films via streaming services such as Netflix [NFLX].

The AMC stock price has dropped off from those highs, sitting at $17.66 in premarket trading on 28 February. Its market cap has also dropped from about $20bn in November to $9bn in late February.

The drop in its share price has helped short-sellers recover some of their losses after they were burned by the rocketing rise at the start of 2021. From the early part of December last year, according to analytics firm Ortex, sellers had gained $1.1bn on their bets against AMC stock, nearly halving their year-to-date losses.

Short-sellers of fellow meme stock GameStop [GME] made $330m since the start of December, but were still down $11.78bn in the year to date. Its volatility created some hedge fund winners such as Senvest Management, which made $700m in profit from GameStop after buying it for under $10 and selling when its stock peaked in late January.

According to MarketBeat, AMC has its main institutional exposure to BlackRock [BLK], Vident Investment Advisory and Wells Fargo [WFC].

AMC CEO Adam Aron believes that AMC is much more than a meme stock, citing the company’s plan to sell its AMC Perfectly Popcorn in shopping mall retail stores, counters, kiosks and direct to people’s homes. He also wants his theatres to show more sports and pre-taped concerts, as well as accepting cryptocurrencies such as bitcoin [BTC-USD] to pay for tickets.

Revenue beat in Q3

In its third quarter AMC reported a loss per share of $0.44, compared with forecasts of a $0.53 loss. Its revenues came in at $763.2m, up from $119.5m last year and against expectations of $708.3m. It said 40 million people watched films in the quarter, up from 22 million in the previous three month period. Admission revenues rose to $425.1m, up from $62.9m a year ago with food and drink sales of $265.2m up from $29.1m.

“Our numbers continue to markedly improve. The upward trend is clear and unmistakeable...” – AMC CEO Adam Aron

“Our numbers continue to markedly improve. The upward trend is clear and unmistakeable,” Aron said in the firm’s earnings call. “We have upped our game in alternative events such as sports and more caption services for the hearing impaired and those with English as a second language.”

Analysts are still unsure

Overall, analysts are unconvinced about future growth. According to MarketScreener, the stock has a consensus ‘underperform’ rating and a target price of $10.45.

In a note shared with Opto, Wedbush analyst Alicia Reese — who has an ‘underperform’ rating and a $15.73 target — said that AMC will benefit from industry consolidation and alternative content to drive attendance.

“It will add premium large format screens and more dynamic ticket pricing in order to drive average ticket higher overall as the film slate shifts toward more blockbuster content,” she wrote.

Reese added that AMC had made the “best of its meme stock status” by selling shares at a premium in the first half of last year, raising significant capital to pay down debt and acquiring several quality screens. However, she is concerned about AMC’s $3.9bn debt pile and expects continued volatility in its shares “with an overall decline the longer it takes for retail investors’ theories to be substantiated”.