Analysts at Wedbush have lowered their price target on AMC Entertainment Holdings (NYSE:AMC) from $6 to $4 ahead of its first quarter earnings report on their view the company’s heavy debt load and lack of dividends overshadow positive factors.
“AMC expanded its market share in 2023 and can expand further from its 22.5% market share with its vast network of premium large-format screens and concert movie distribution,” Wedbush analysts wrote.
“AMC also has an opportunity to drive revenue growth from its European circuit with theatre upgrades that would boost per-screen averages, although it is unlikely to do so until it works through balance sheet right-sizing over the next two years.”
The Wedbush analysts noted that AMC has to cover interest payments and leases as it continues to chip away at its more than $3 billion debt repayments due over the next three years while renegotiating the rest.
Looking at the first quarter, the analysts have raised their forecasts for AMC based on better-than-expected box office performance.
They upped their revenue estimate from $786 million to $882 million, compared to the Wall Street consensus of $840 million.
International revenue is expected to be $229 million with the analysts noting that titles that the quarter’s best-performing films did better domestically than in Europe, like Dune 2, due to AMC’s larger IMAX footprint in the US.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to be $18 million.
They believe margins will remain depressed through to the third quarter of 2024 due to ongoing cost pressures from higher minimum wages, utilities, and concessions, partially offset by better film rent. But they expect margins to recover and rise overall in 2024.
“This underscores our view that moviegoers increasingly opt for premium screens and higher-ticket concessions baskets when the content is worthwhile,” they wrote.
The analysts also highlighted that their forecasts do not include any alternative content such as concert films in 2024 or 2025, as none have been announced. They believe these could lift AMC's results “materially” from their current “moderate” view.
They maintained their ‘Neutral’ rating on the stock, which traded hands at $2.92 on Thursday afternoon.
Their $4 price target is based on a seven-times enterprise value to EBITDA multiple on their revised 2026 estimate.
“AMC is finally trading in line with its pre-meme historical multiple, albeit still at a premium to its competitors,” they wrote.