Wall Street analyst Eric Handler downgraded AMC to “sell” on Monday, despite the recent action of the movie chain and announced that it will not file for bankruptcy soon.
Handler of MKM Partners said AMC’s shares had been “decoupled” from the fundamentals and should be sold, adding that the shares could fall to $ 1 this year.
Raised by investors in the RedSit chat group WallStreetBets, AMC shares rose more than 30% Monday morning. AMC shares stabilized at just over 6%, at about $ 14.10 in lunch trading.
Although the stock rose 4.63 or 54 percent on Friday, it has now recovered only 50 percent from the 57 percent dip it suffered last Thursday, as the Robinhood trading platform continues to restrict the purchase of escaped shares.
Handler downgraded its AMC rating to “sell” after hitting a neutral point in May 2020. The analyst also halved its 12-month stock price target to $ 1 from $ 2. noting that although liquidity is not an issue for 2021, “achieving solvency has come at a high price. ”
The analyst noted the dilution of shares as a result of the company’s efforts to raise money by issuing new shares to retail investors, as well as its growing debt. He also expressed concern that recent transactions “decoupled the price of AMC shares and its valuation”.
The analyst acknowledged last week’s positive news, namely that short-term bankruptcy prospects have been averted, as the troubled movie theater chain has raised $ 1.2 billion in fresh capital over the past two months.
“However, shareholders have been diluted by about 75 percent in the last two months and there are still about $ 5.7 billion in debt, a total that increases quarterly due to deferred interest payments that are affected by the principal balance.” Handler said. “There is also an excess of $ 450 million in deferred rents that will one day have to be addressed.”
Handler estimates that AMC currently has approximately 440 million shares outstanding, based on recent company records and market announcements. [ATM] stock offers and debt exchanges. This compares with the total of 137.4 million Class A and Class B shares that the company held at the end of October.
“It would not be surprising to see AMC exploring the possibility of another ATM offering due to the high price of the company’s shares,” Handler said. “Additional debt swaps in equity are probably another way management will explore.”
AMC shares rose 506 percent this year, while the S&P 500 index fell 0.1 percent.