Analyst Reiterates $1 Price Target On AMC Entertainment After Q1 Beat: Here's Why

Zinger Key Points
  • MKM Partners analyst says AMC's current valuation is "irrational."
  • Points to 400% stock price increase and company's $5.57 billion debt.

In its first-quarter earnings report, movie theater leader AMC Entertainment Holdings AMC reported revenue and earnings per share that both beat Street estimates. The company also highlighted a robust slate of 2022 blockbuster movies.

Although, the report wasn’t enough to help impress one of the company’s most vocal bears.

Related Link: AMC Entertainment Q1 Earnings Highlights: Revenue And EPS Beat Estimates, CEO Highlights Blockbuster 2022 Lineup

The AMC Analyst: MKM Partners analyst Eric Handler reiterates a Sell rating on AMC shares and has a price target of $1.

The Analyst Takeaways: Handler said fundamentals for AMC Entertainment could be improving, but the company’s capital structure remains in question.

“The box office should get better from here, but it’s still the capital structure which drives our negative view towards the company’s shares,” Handler said.

The analyst said while there is a strong slate of blockbuster movies coming this year, there is a question on the number of non-blockbuster movies being released.

“We remain concerned about the slower-than-anticipated pace of the theatrical industry’s overall recovery, most notable a 30% decrease in content volume.”

Handler also points to AMC shares having risen 400% since the start of the pandemic, along with the company's $5.57 billion in debt.

“It could take many years for the company to grow into its capital structure.”

Despite a bearish take and $1 price target, the analyst does highlight several positives for the company including its popcorn plans, a co-branded credit card, non-fungible tokens, and opportunistic investments.

The analyst indicates the company’s current valuation is “irrational” based on trading at 19.5x EV/adjusted EBITDA, versus a peak of 9x for the industry.

AMC Price Action: AMC shares are down 4.39% to $11.97 on Tuesday, according to Benzinga Pro.

Photo: Created with an image from samantha celera on Flickr

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Posted In: Analyst ColorEarningsEntertainmentNewsPrice TargetReiterationTop StoriesAnalyst RatingsGeneralEric HandlerMKM Partnersmovie theater stocksmovie theaters
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