AMC Shares Pop On Upgrade: Why Analyst Sees Potential For Sharp Recovery

Meme stock AMC Entertainment Holdings Inc AMC, which has had a volatile ride amid the WallStreetBets phenomena, is advancing strongly Monday following a positive analyst action.

The AMC Analyst: B. Riley Securities analyst Eric Wold upgraded AMC shares from Neutral to Buy and bumped up the price target from $7 to $13.

Not long ago, the stock was panned as dramatically overvalued by some analysts.

See also: How to Buy AMC Stock

The AMC Thesis: Given that the North American theater base is only 60% open at this point and theater capacity restrictions are in place, the opening weekend domestic box office performance for "Godzilla vs. Kong" from Walt Disney Co's DIS Warner Bros. is impressive, analyst Wold said in a note.

The $48.5 million in box office revenues for "Godzilla vs. Kong" compares favorably to the $47.8 million opening weekend revenues notched up by "Godzilla: King of the Monsters" in May 2019, the analyst noted.

Related Link: "Godzilla vs. Kong" Smashes Pandemic-Era Box Office With $48.5 Million Debut

These results, the analyst said, are very telling as the movie was available for free to HBO Max subscribers at the same time as the theatrical release.

"We believe consumers want to leave the house and return to the theater," Wold wrote in the note.

Apart from this positive indicator, the analyst said he is also impressed with AMC management's ability to weather the pandemic headwinds. by both strengthening the balance sheet and negotiating with landlords to improve the cash runway into 2022.

With the management showing intent to use equity to reduce debt, B. Riley can now be more constructive on the upside opportunity for the shares, the analyst said.

Related Link: Is The Era Of Meme Stocks And NFTs Already Over?

AMC is well-positioned to benefit from the industry's projected resurgence and return to pre-pandemic attendance levels by 2023, given that it is the largest exhibitor in North America and the operator of the highest number of premium IMAX screens, Wold said.

While noting that valuation implied by the new price target is well above historical averages, the analyst said he sees potential for sharply positive stock price movements, thanks to a combination of continued global box office recovery momentum, additional studio windowing agreement cooperation and successful balance sheet deleveraging.

AMC Price Action: At last check, AMC shares were up 14.53% to $10.73.

Related Link: Why Wanda Group Is Trimming Its Holdings In AMC Theater Chain

(Photo: Gpwitteveen via WikiCommons.)

Posted In: B Riley SecuritiesCinemaEric WoldmoviesAnalyst ColorUpgradesPrice TargetAnalyst Ratings