Movie theater company AMC Entertainment Holdings (NYSE:AMC) is drawing praise from analysts for market share gains and a strong end to the second quarter, but balance sheet concerns remain after reporting quarterly results.
The AMC Analysts:
- Wedbush analyst Alicia Reese maintains a Neutral rating and $4 price target.
- Benchmark analyst Mike Hickey maintains a Market Weight rating and has no price target.
Wedbush on AMC: The movie theater company could see market share gains in a rebounding market, Reese said in a new investor note.
The analyst said a large network of premium screens and concert movie distribution deals could help "justify its premium valuation."
"AMC can also drive revenue growth in Europe with theater upgrades. However, it is unlikely to do so until it works through balance sheet right-sizing," Reese added.
Reese said the high debt load and no dividend payment overshadow the positive results reported in the second quarter.
"Since the beginning of 2022, AMC has reduced its debt by $1 billion but still has $4 billion remaining net debt."
The analyst predicts AMC will raise more capital in the coming months to help cover interest payments and conserve cash.
"We expect AMC's shares to remain volatile as its shareholders dislike its frequent share issuances."
Benchmark on AMC: The movie theater company reported a significant drop in revenue and EBITDA in the quarter, Hickey said.
The analyst highlighted the company’s strong performance at the end of the quarter, driven by several box office hits.
"Despite a slow start to the quarter due to industry strikes, strong box office performances in June, particularly with Disney's Inside Out 2, contributed to a record-setting end to the quarter," Hickey said.
Another positive from the earnings report was a higher average ticket in the quarter, the analyst added. Concession revenue per attendee was also up in the quarter for domestic theaters, but down for the international segment and overall.
Hickey said AMC trades at 9.4x EV/EBITDA based on fiscal year 2025 consensus estimates, which is a higher valuation than movie theater peers Cinemark (6.7x) and Marcus (5.4x).
Why It's Important: The movie theater company had several positives in the second quarter, and the momentum at the end of June could signal what’s to come.
AMC saw its domestic market share up 50 basis points year-over-year to 22.5%. The domestic concessions per attendee hit an all-time high of $8.34 in the second quarter, which was attributed to several items, including specialty popcorn buckets.
"The quarter finished with incredible strength powered by the success of Disney's Inside Out 2, which is now the highest grossing animated movie of all time. AMC saw a remarkable contrast between the early quarter with a dearth of movie releases and the end of the quarter with a record setting movie delighting audiences in our theaters," AMC CEO Adam Aron said.
Aron stressed the importance of looking at the second quarter as AMC being "two different companies," with the contrast of the start to a record-breaking adjusted EBITDA of $29.4 million in June.
The AMC CEO continues to look ahead to future years with a lineup of exciting hit movies.
"With a long list of blockbuster movie titles opening in theaters during the remainder of the year and into 2025 and 2026, the industry-wide box office now appears to us to be poised for sustained growth. Looking ahead, we believe that bodes ever so well for the increasing cash generation potential from AMC's movie theaters both at home and abroad."
The third quarter results will include the impact from strong box office performers like "Despicable Me 4" and "Deadpool & Wolverine."
"Just a week ago AMC recorded our highest-ever opening weekend attendance and highest-ever opening weekend admissions revenue for a rated-R movie."
Aron said he is "more confident than ever" in AMC's ability to thrive.
AMC Price Action: AMC shares are down 4% to $4.74 on Monday, versus a 52-week trading range of $2.38 to $48.18. AMC stock has fallen 89% over the last year.
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