Movie theater operators hope the spread of vaccines and looser restrictions on public gatherings will help their business rebound after a bleak 2020, but not all networks are created equal.
Holdings (ticker: AMC), the largest U.S. theater operator, has raised more than $ 1 billion in cash through the sale of stocks and convertible debt deals since the fall to create a cushion until the business can return normally. But that puts him at a disadvantage, according to Richard Greenfield of LightShed Partners.
The analyst kicked off AMC shares in a sale Wednesday, setting a price target of 1 cent, saying the company’s multiple is not justified given its borrowing and cash flow.
The company is likely to discuss its expectations about the impact of mass vaccines and the reopening of the economy when it reports earnings Wednesday night after the bell. Last month, CEO Adam Aron said that the reopening of movie theaters in New York City, with some Covid-related restrictions, was “another important step in restoring the health of the movie theater industry and of our company”. In January, Aron ruled out the need to file for bankruptcy after the company raised more cash.
AMC shares, which have been caught up in the Robinhood retail trading frenzy, rose 13.2% on Wednesday in volatile trading. But they lost momentum and were up just 2.4% to $ 10.75 on a recent check. They have risen around 400% so far this year compared to the
4% profit so far this year.
According to Greenfield’s calculations, at Tuesday’s closing price of $ 10.50, AMC’s stock is trading at more than 15 times estimated 2022 adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda. And that Ebitda is “in secular decline from that point on with no cash free cash flow and debt to EBITDA by more than 8x,” he said in a note.
He called the stocks “dramatically overvalued.”
Analysts tracked by FactSet 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 a loss of $ 31.18 per share on sales of $ 1.2 billion.
For the full year 2019, AMC reported a loss of $ 1.08 per share on sales of $ 5.55 billion. In 2019, AMC reported an adjusted Ebitda of $ 771 million, Greenfield said, but predicted that the same metric by 2022 will struggle to reach $ 600 million.
It’s not just a persistent unwillingness of some viewers to return to theaters in person without knowing the vaccine status of those sitting around them, he argued. Hollywood studios have changed consumer habits by releasing new movies through on-demand streaming, at home, and rolling back or narrowing the window of theatrical releases.
That means forecasting box office sales for AMC’s domestic and international screens is tricky. Greenfield estimates a high single-digit gain during 2019 for AMC domestic sales in 2022 (ignores 2020 and 2021 due to the pandemic). But he adds, “honestly, it looks like it could be significantly worse.”
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