AMC Entertainment Holdings (NYSE:AMC) is expected to gain more market share as the cinema market rebounds, analysts at Wedbush believe.
They see the cinema chain further expanding its market share from 22.5% in 2023 with its network of premium large-format screens and concert movie distribution.
Analysts also expect revenue growth in Europe with theatre upgrades but see this is unlikely until AMC works through balance sheet right-sizing.
“The company’s heavy debt load and lack of dividend overshadow these positive factors, but AMC is focused on alleviating its debt,” they wrote in a note to clients.
“Since the beginning of 2022, AMC has reduced its debt by $1 billion but still has $4 billion remaining net debt.”
The 2024 box office is seen as relatively flat year-over-year, with a strong rebound beginning in the third quarter with the release of Deadpool & Wolverine.
“Comparisons ease significantly in September and Q4 2024, and momentum should grow with a solid slate and robust release volume in 2025,” they wrote.
“Earnings before interest, taxes, depreciation and amortization (EBITDA) should rise in 2025 and beyond, and AMC will likely raise more capital in the coming months via exchangeable notes and direct share issuances. AMC must cover its interest payments and conserve cash while it posts losses.”
AMC’s shares are expected to remain volatile as its shareholders dislike its frequent share issuances, the analysts added.
They have a ‘Neutral’ rating on the stock and a $4 price target. Shares of AMC traded hands at $5 on Tuesday afternoon.
“AMC is trading at a slight premium to its prememe historical multiple, and above its competitors. We believe AMC’s valuation is full at our $4 price target,” analysts concluded.