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AMC Entertainment reports fourth-quarter earnings Wednesday.
Angela Weiss / AFP through Getty Images
Cinema operators hope that the spread of vaccinations and weaker restrictions on public gatherings will help their business retire after a bleak 2020, but not all chains are alike.
AMC Entertainment
Holdings (ticker: AMC), the largest theater operator in the United States, raised more than $ 1 billion in cash through stock sales and convertible debt transactions in the fall to build a pillow until business can return to normal. But that puts him at a disadvantage, according to Richard Greenfield of LightShed Partners.
The analyst on Wednesday initiated AMC shares on a sale, setting a target price of 1 cent, saying the company’s multiples are not justified, given the debt and cash flow.
The company is likely to discuss its expectations about the impact of mass vaccinations and the reopening of the economy when it reports earnings on Wednesday night after the bell. Last month, CEO Adam Aron said the reopening of cinemas in New York City – with some restrictions on Covid – was “another important step towards restoring the health of the film industry and our company.” In January, Aron ruled out the need to file for bankruptcy after the company raised more money.
Shares of AMC, which were captured by the frenzy of Robinhood retail transactions, rose 13.2% on Wednesday in volatile trading. But they lost momentum and rose just 2.4 percent to $ 10.75 on a recent check. They have increased by about 400% so far this year compared to
S&P 500
Earnings of 4% from one year to another.
According to Greenfield calculations, at Tuesday’s closing price of $ 10.50, AMC shares are trading more than 15 times the adjusted earnings estimated in 2022 before interest, taxes, amortization and amortization or Ebitda. And that Ebitda is “in secular decline since then, effectively with no free cash flows and debts to EBITDA of more than 8x,” he said in a note.
He called the actions “dramatically overvalued.”
FactSet analysts expect AMC to report a fourth-quarter loss of $ 3.24 per share for the quarter, with anemic revenue of $ 142.3 million. For the full year 2020, the forecast is for a loss of $ 31.18 per share from sales of $ 1.2 billion.
For the full year 2019, AMC reported a loss of $ 1.08 per share from sales of $ 5.55 billion. In 2019, AMC reported an adjusted Ebitda of $ 771 million, Greenfield said, but predicted that the same value for 2022 will struggle to reach $ 600 million.
It is not just a persistent lack of desire of some moviegoers to return to the cinemas in person, without knowing the vaccine status of those sitting around them, he argued. Hollywood studios have changed consumer habits by launching new movies by streaming on demand, at home and pushing back or narrowing the window of movie releases.
This means that the forecast of box office sales for AMC’s domestic and international screens is difficult. Greenfield estimates a single-digit high gain from 2019 for AMC’s domestic sales in 2022 (ignores 2020 and 2021 due to the pandemic). But he adds, “it honestly feels like it could be significantly worse.”
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