AMC set for Q4 share gains but expect a 'tumultuous' 2024, says Wedbush

By James Rogers

Movie theater chain and original meme stock AMC reports fourth-quarter results after market close on Wednesday.

AMC Entertainment Holdings Inc. is set for share gains when it reports fourth-quarter results Wednesday, according to analyst firm Wedbush, although 2024 could be a "tumultuous" year for the movie-theater chain.

"AMC expanded its market share in 2023 and is positioned to maintain or expand further on its 22% market share with its vast network of premium large-format screens and concert movie distribution," Wedbush analyst Alicia Reese wrote in a note released Friday. AMC (AMC) also has an opportunity to drive revenue growth from its European circuit with theater upgrades that would boost per-screen averages, she added.

Underpinning AMC's share gains, the analyst pointed to the success of concert films "Taylor Swift: The Eras Tour" and "Renaissance: A Film by Beyoncé."

Related: AMC hits another record low close, reflecting demise of its 'meme-stock' status

"AMC likely gained market share in Q4:23 as it distributed the Taylor Swift and Beyonce concert films throughout its circuit and competitors' global circuits in the quarter," wrote Reese. "We expect more alternative fare in 2024."

Analysts surveyed by FactSet expect AMC to report a fourth-quarter loss of 57 cents a share and revenue of $1.058 billion.

Wedbush's Reese cautioned that 2024 could be "bumpy" for AMC. "2024 will likely be tumultuous, with pockets of strength offset by volume holes," she wrote. "We estimate that 2024 North American box office will end down 7% YoY to $8.3 billion after a 21% YoY rise in 2023. We modeled 2025 up 20% YoY as many 2024 titles were delayed after the long SAG-AFTRA strike."

Related: AMC's stock has tumbled. CEO Adam Aron says he'll 'have much to say' on the company's Q4 earnings call.

Wedbush now thinks that AMC faces a first-quarter EBITDA loss given the "soft slate through the first two months of the quarter" although this will be partially offset by a strong March with the latest "Dune" movie likely outperforming on IMAX Corp. screens, according to Reese. "AMC has the largest domestic footprint of IMAX screens," Reese added. "We expect AMC to return to positive EBITDA through the balance of the year, and expand margins in 2025 over 2023."

But the analyst also pointed to AMC's debt load and the absence of a dividend. "Our positive sentiment around further market share expansion and the opportunity to upgrade its European circuit is offset by the company's heavy debt load and lack of a dividend," Reese added. "AMC is finally trading in line with its prememe historical multiple, albeit still at a significant premium to its competitors."

AMC has net debt of $4.095 billion, according to Wedbush, which has a neutral rating and $6 price target for the movie theater chain and original meme stock. "AMC will likely continue to issue shares as it must service its debt and prepare for debt repayments coming due over the next three years ($5 million in 2024, $98 million in 2025, $2.9 billion in 2026, and $525 million in 2027)," Reese wrote. "AMC will seek to renegotiate debt terms before 2026."

Related: AMC's share price is 'so frustrating,' and strikes have 'ruined' early 2024 box office, CEO says

In December AMC completed its latest at-the-market equity offering, raising approximately $350 million as it attempts to reduce its debt burden, which was more than $5 billion in 2022. The equity offering, which was launched Nov. 9, and repurchased debt or exchanged debt for equity, reduced the company's liabilities by $62.28 million, AMC said.

Of seven analysts surveyed by FactSet, four have a hold rating and three have a sell rating for AMC.

AMC shares have fallen 33.9% in the last three months, compared with the S&P 500 index's gain of 12%. Shares of the movie theater chain hit a record closing low of $3.67 on Feb. 5, reflecting the demise of the company's meme-stock status. The stock has since registered gains and ended Friday's session at $4.44. However, this is a far cry from the heady days of the meme-stock frenzy, when the company's shares hit an all-time closing high of $339.05 on June 2, 2021, according to Dow Jones Market Data.

Related: AMC CEO sends Taylor Swift 'eternal gratitude' as Eras Tour concert film makes history

Earlier this month AMC CEO Adam Aron said that he will "have much to say" about "what is going on" when the company reports its fourth-quarter results.

"AMC will announce q4 and full year 2023 earnings Feb 28 at 5:00 pm EST," he wrote on X, formerly known as Twitter, on Feb. 15. "I realize many of you have wanted my take as to what is going on, but the best time to do so is on this year ending earnings call. Listen to the webcast. I'll have much to say."

In January Aron tweeted that the 2023 actors' and writers' strikes have "ruined" the early 2024 box office.

Related: AMC shares climb as Beyoncé's 'Renaissance' reigns

AMC rival Cinemark Holdings Inc. (CNK) recently reported a wider-than-expected fourth-quarter loss, although revenue beat analysts' expectations.

-James Rogers

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02-26-24 0948ET

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