AMC's Stock Is Down On Psychology Rather Than Facts

AMC Entertainment Holdings Inc (NYSE: AMC)'s stock is being treated unfairly by investors since the business is "clearly working," according to Loop Capital Markets' David Miller.

AMC's two most recent earnings reports handily came in above expectations in nearly every relevant metric but this isn't reflected in the stock, Miller stated in a research report. In fact, the disconnect between the stock and business is "highly elevated" as shares are notably lower since February as investors are selling the stock due to "psychological issues that are based largely on formation of opinion," such as the rise of premium video on demand (see Miller's track record here).

Poor Slate Of Movies

Movie theater companies including Regal Entertainment Group (NYSE: RGC) and Cinemark Holdings, Inc. (NYSE: CNK) did see a decline in box office sales at a time when consensus estimates were calling for a growth, Miller continued. But this could be a result of the release of many poorly-reviewed films, especially "Baywatch," "Alien 5" and "The Mummy." In fact, the one consistently positive film, "Wonder Woman" continues to occupy screen capacity at major theaters.

Meanwhile, AMC's acquisitions of Odeon/UCI and Nordic look "timely" and come at a time when European box office sales were up 8.9 percent year over year in the second quarter, the analyst added. This also serves as a counterbalance against poor performance in the American market.

Bottom line, AMC's stock isn't trading on "fact" and the analyst maintains a Buy rating with a $39 price target.

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Image Credit: By Miosotis jade (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia CommonsUp Its Sleeves?