Ahead of AMC Entertainment Holdings (NYSE:AMC) reporting its second quarter earnings on Tuesday, August 8, Wedbush analysts reiterated their ‘Underperform’ rating for the stock despite its cash concerns and the ongoing Hollywood strikes overshadowing strong box office trends.
The analysts wrote in a note to clients that theatrical exhibition is on the path to normalization, with an improving release state in 2023.
“Our industry estimates are for 2023 North American box office to end up 20% over 2022 (about 78% of 2019 box office), with AMC at least maintaining its 22% market share if not expanding with its vast network of premium large format screens,” they wrote.
The Wedbush analysts expect AMC to report 2Q market share of the domestic box office of at least 21.5%, compared to its pre-pandemic average of 21% and its post-pandemic average of 23% when it hands down its latest earnings on August 8 after the market close.
They forecast 2Q revenue of $1.31 billion compared to the average analyst estimate of $1.27 billion.
They expect earnings per share of $0.04, slightly below the consensus estimate of $0.05 per share, according to Zacks Consensus Estimate.
Domestic revenue is forecast as $1.03 billion with attendance up 7% year-over-year, and international revenue is expected to be $274 million on a 4% increase in attendance over the year-ago quarter.
“We expect positive commentary [from AMC management] about the successful Barbie and Oppenheimer runs so far in AMC's domestic and European markets,” the analysts noted.
“We also expect an overall optimistic view on the company’s ability to mitigate any negative impacts of the ongoing labor strikes, should they end in the next one to two months.”
Volatility expected
The analysts also noted the company’s ongoing legal case, with a Delaware judge last week blocking a deal that would have converted its preferred equity units (APEs) into common stock through the issuance of more shares.
AMC filed a modification to address the court’s concerns with AMC CEO Adam Aron on Twitter directly urging shareholders to reconsider AMC’s cash requirements over the coming two years.
“In spite of recent box office successes, AMC is instead concerned with its cash requirements, APE shares falling, and the writers’ and actors’ strikes persisting,” the analysts highlighted.
They wrote that they continue to expect volatility in both AMC and APE shares while the judge considers the modification AMC submitted.
“In the meantime, we think AMC will wait as long as possible before issuing APE shares at such a significant discount to AMC shares, and while Adam Aron attempts to persuade his shareholders to act in the best interest of AMC.”
The analysts also maintained their $2 price target on AMC shares based on a “generous” 12 times enterprise value (EV)/earnings before interest, taxes, depreciation, and amortization (EBITDA) multiple on their full-year 2025 EBITDA estimate.
AMC shares traded at $5.01 on Friday afternoon.
“We value AMC at a premium multiple relative to its pre-COVID historical range of seven times to nine times due to its majority retail ownership who value AMC shares significantly higher than AMC’s peers,” they wrote.
- Updated with share price movement -
Contact the author at emily.jarvie@proactiveinvestors.com
Follow her on Twitter @emilyjjarvie