AMC Earnings Were 'Pretty Great' And 'Better Than Expected': Why Rich Greenfield Calls AMC/APE Situation 'Lose/Lose' For Shareholders

Zinger Key Points
  • “AMC expects the box office recovery will continue apace in FY23," says Benchmark analyst Mike Hickey.
  • LightShed Partners analyst Rich Greenfield says AMC burned through $830 million in cash in 2022.

Movie theater leader AMC Entertainment Holdings Inc AMC reported fourth-quarter financial results after market close Tuesday. The company also shared an update on liquidity and a planned shareholder vote.

What Happened: AMC reported fourth-quarter revenue of $990.9 million, down 15.4% year-over-year. The revenue total beat a Street estimate of $977.7 million.

The company’s loss of 14 cents per share in the fourth quarter also beat a Street estimate of a loss of 21 cents per share.

Benchmark analyst Mike Hickey called the results from AMC “better than expected.”

“AMC expects the box office recovery will continue apace in FY23, as Hollywood is expected to release approximately 75% more major movie titles (as defined by a film generating $100 million) than it did in FY22,” Hickey said.

The analyst, who had a Neutral rating on AMC and no price target, said the first quarter box office performance was impressive with “Avatar: The Way of Water” leading the way.

Hickey highlighted a strong 2023 film slate with “Creed” and “John Wick” sequels among the March releases. AMC said its 2023 box office should grow between 15% to 25% compared to 2022.

Related Link: Trading Strategies For AMC Entertainment Stock After Q4 Earnings 

What Others Are Saying: LightShed Partners analyst Rich Greenfield had been critical of AMC in the past and shared his thoughts on the company’s earnings report on Twitter.

“AMC/APE fascinating situation developing looks like it’s a lose/lose for $AMC investors,” Greenfield said.

Greenfield said the two share classes of AMC and Ape Units APE could collapse into one and AMC shares could fall down further. The other scenario sees the conversion of APE to AMC failing and AMC could be limited in raising additional capital and forced to file for bankruptcy.

“Love how $AMC CEO spun retail shareholders on positive EBITDA while neglecting NEGATIVE free cash flow and that they are running out of cash. AMC CEO says let us continue to dilute you or we may go bankrupt.”

Greenfield said AMC burned through $830 million in cash in 2022 and posted a negative free cash flow of $105 million in the fourth quarter.

“Even as box office rebounds, this company cannot generate cash.”

Wedbush analyst Alicia Reese called the AMC quarter “pretty great” with a topline revenue beat and EBITDA beating estimates.

“What we saw and what we’d expect to continue into the first quarter is that they held onto those market share gains because patrons continue to go to premium large-format screens,” Reese said.

North American attendance for movie theaters in 2022 was at around 65% of pre-COVID-19 pandemic levels. Reese sees this figure jumping to 75% in 2023 and rebounding further after that, similar to comments from AMC CEO Adam Aron.

Reese, who had an Underperform rating on AMC, said she valued the company compared to pre-pandemic levels and versus peers, not on inflated valuation due to being part of the meme stocks.

Speaking of the AMC and APE share proposal, Reese said AMC is positioning itself for the approval to pass.

Reese said the new popcorn deal with Walmart Inc WMT comes with AMC having a high-margin concessions business. The new retail popcorn initiative will have lower margins than theaters but could help with profitability when rolled out to over 2,500 Walmart stores.

“I don’t expect it to be a game-changer, but it can provide a nice cushion.”

Short seller Jim Chanos criticized the comments from Reese in an interview.

“Narrator: If by ‘pretty great’ you mean $AMC burned another $100 million in the quarter,” Chanos tweeted.

AMC Price Action: AMC shares are down 7.45% to $6.58 on Wednesday at publication.

Read Next: Legal Spat Pits Investors Against Meme Stock Brass

Photo: Shutterstock


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Posted In: Analyst ColorEarningsEntertainmentNewsPenny StocksShort SellersReiterationSmall CapAnalyst RatingsTrading IdeasGeneralAdam AronAlicia ReeseAvatar: The Way of WaterBenchmarkJim ChanosLightshed PartnersMike Hickeymovie theater stocksmovie theatersRich GreenfieldWedbush
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