AMC Earnings Preview: Grab The Popcorn — Legal Spat Pits Investors Against Meme Stock Brass

Zinger Key Points
  • A popcorn deal with Walmart didn't detract from the looming AMC lawsuit and a lackluster prelim earnings report.
  • AMC has high hopes for 2023 box office, expecting it will grow between 15%-25% thanks to a long list of big-budget sequels.

AMC Entertainment Holdings AMC shares spiked early in Tuesday's session after the movie theater chain confirmed a partnership with Walmart WMT to introduce a line of six movie theater-style popcorn items.

The timing of this announcement coincides with not-so-positive news: AMC investors are suing the meme stock's higher-ups over a stock dispute.

Plus, analysts expect AMC's upcoming earnings report to be a huge miss. Here's what you need to know. 

See Also: 'This Is Terrible' - Major Brokerage Sounds Alarm On AMC, Meme Stocks

What Happened: While AMC saw marked strength during Monday's session when common shares jumped 28% in the afternoon, certain investors are worried.

That's because company bosses want to convert AMC Preferred Equity (NYSE: APE) shares into common shares.

Why It Matters: A conversion will "eviscerate" the voting power of common stockholders, investors say.

If AMC were to issue additional shares, it would increase the number of common stock being traded and, for existing investors, more shares being issued can dilute shares and tank the value of the existing shares for investors.

Common shareholders filed a lawsuit against the Leawood, Kansas-based company on Feb. 20 in an effort to block the conversion. 

What's Next: The conversion vote is expected to take place on March 14, but AMC will not act to increase the share count before a judge rules.

According to Seeking Alpha, a Delaware judge late during Monday's session agreed to hold a hearing on April 27.

See Also: AMC Arbitrage Traders Face Big Question - Will Preferred Equity Get Converted Into Common Stock?

What Analysts Are Saying: AMC will report its results for the fourth quarter and fiscal 2022 after the market closes Tuesday.

Benchmark analysts reduced their growth projections, citing a disappointing box office. Here's a breakdown:

  • Total revenues in the fourth quarter are expected to hover at around $954 million
  • That's short of the $1.02-billion consensus and down compared to $1.17 billion for the same three-month period in 2021.
  • Q4 EBITDA is estimated to be $1 million — way short of the $11-million consensus
  • It's also down compared to the $159 million in EBITDA reported in Q4 2021.
  • Total 2022 revenue is expected to be $3.8 billion; just shy of the $3.9-billion consensus but up compared to the $2.5 billion for 2021.
  • EBITDA for 2022 is expected to be $33 million against a consensus of $42 million; but not as bad as the $292-million loss for 2021.

AMC, for what it's worth, has high hopes for the 2023 box office, expecting it will grow between 15%-25% thanks to a long list of big-budget sequels: "Creed" and "John Wick" in March; "Guardians of the Galaxy" and "Fast and Furious" in May; "Spider-Verse" and "Transformers" in June; "Indiana  Jones," "The Marvels" and "Mission:  Impossible" in July; "Dune" and "The Hunger Games" in November; and "Aquaman" in December.

AMC Price Action: The stock was trading down 5.2% at $7.20 midday Tuesday.

Next: What's A Death Spiral Convertible? Michael Burry Sounds Alarm On Meme Stocks

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