AMC Entertainment Holdings (NYSE:AMC) is expected to deliver steady earnings on Tuesday, with market share gains and operational improvements bolstering its performance.
However, despite these positive indicators, Wedbush analysts maintain a “Neutral” rating with a $4 price target, citing AMC’s sizable debt load and the challenges of covering interest expenses in the near term.
"AMC has consistently gained market share since the pandemic," Wedbush analysts noted, adding that the company’s recent focus has been on "improving its overall footprint by closing unproductive doors."
This approach, combined with AMC's extensive network of premium large-format screens, has allowed the company to "at least maintain domestic market share and grow its international share," the analysts wrote.
Still, Wedbush cautions that AMC is unlikely to receive significant credit for these improvements until it makes progress on restructuring its balance sheet. "Since the beginning of 2022, AMC has reduced its debt by $1 billion but still has $4 billion remaining net debt," they wrote. While AMC recently extended the maturities on a portion of its debt due in 2026, Wedbush projects that AMC’s EBITDA in 2024 will still fall short of its interest expenses, with positive cash flow anticipated starting in 2025.
AMC has been working to shore up its finances by raising capital through exchangeable notes and direct share issuances, in addition to closing underperforming theaters. "AMC must cover its interest payments and conserve cash while it posts losses, and closing unproductive theaters is a quick way to do that," the analysts wrote.
Shares of AMC were trading around $4.38 on Monday afternoon.