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AMC poised for market-share gains, boosted by premium screens and concert movies, Wedbush says

By James Rogers

Movie-theater chain and original meme stock AMC rode the popularity of last year's concert movies from Taylor Swift and Beyoncé

Movie-theater chain and original meme stock AMC Entertainment Holdings Inc. is well positioned to grow its market share, according to analyst firm Wedbush, pointing to the company's footprint of large-format screens and the current vogue for concert movies.

"AMC expanded its market share in 2023 and can expand further from its 22.5% market share with its vast network of premium large-format screens and concert movie distribution," Wedbush analyst Alicia Reese wrote in the note. "AMC also has an opportunity to drive revenue growth from its European circuit with theater upgrades that would boost per-screen averages, although it is unlikely to do so until it works through balance sheet right-sizing over the next two years."

Wedbush maintained its neutral rating for AMC (AMC) but lowered its price target to $4 from $6.

Related: AMC's stock continues rally, registering best two-day stretch since October

Last year AMC rode the popularity of concert movies from Beyoncé and Taylor Swift. The movie-theater chain reaped the benefits of "Renaissance: A Film by Beyoncé" and the record-breaking "Taylor Swift: The Eras Tour." In addition to showing the concert movies in its theaters, AMC was also a distributor for the films. AMC CEO Adam Aron has said that the success of those movies could pave the way for other concert films at AMC.

AMC describes itself as the largest movie-exhibition company in the world, with approximately 900 theaters and 10,000 screens across the globe. The company has around 600 premium large-format screens around the world, Aron said during AMC's recent fourth-quarter conference call, adding that he could "easily" see adding another 150.

While identifying the opportunities for AMC, Wedbush acknowledged the scale of the movie-theater chain's debt burden. "The company's heavy debt load and lack of dividends overshadow these positive factors, but AMC is focused on alleviating its debt," Reese added. "AMC raised over $865 million from equity sales in 2023, and opened the valve for substantially more share issuance to raise capital in 2024 and beyond. AMC's shareholders continue to resist AMC's share repurchases."

Related: AMC CEO Adam Aron says 'it's inconceivable' that the movie theater chain would file for Chapter 11

"Still, AMC must cover its interest payments and leases while chipping away at the $3 billion in debt," she wrote.

Wedbush raised its first-quarter revenue estimate for AMC to $882 million from $786 million. Analysts surveyed by FactSet are looking for first-quarter revenue of $853 million. Wedbush also raised its domestic estimate for AMC to $653 million from $580 million and its international estimate to $229 million from $206 million. "The titles that performed best this quarter were much better domestically than in Europe (namely, Dune 2) due to AMC's much larger IMAX footprint domestically," Reese wrote.

AMC accounts for 50% of all Imax Corp. (IMAX) screens and 100% of the Dolby Cinema screens in the U.S., the company said during its fourth-quarter conference call.

Related: The future looks 'cautiously optimistic' for AMC, Benchmark says

Wedbush raised its AMC adjusted estimate for earnings before interest, taxes, depreciation and amortization to $18 million from a prior estimate of negative $19 million. "But we expect the Ebitda margin to remain depressed through [the third quarter of 2024] due to ongoing cost pressures from higher minimum wages, utilities, and concessions, partially offset by better film rent," Reese wrote.

AMC shares are trading around $2.93, well below their all-time closing high of $44.56, which occurred on June 2, 2021, during the meme-stock frenzy, according to Dow Jones Market Data.

"AMC is finally trading in line with its pre-meme historical multiple, albeit still at a premium to its competitors," Reese wrote in Thursday's note.

Related: AMC CEO Adam Aron's pay package grew to $25.4 million in 2023, but he says it's worth $16.5 million less amid share decline

In a note released earlier this month, Benchmark said that the future looks "cautiously optimistic" for AMC amid an upcoming slate of blockbuster movies and its large footprint of Imax screens.

Last week, Aron said that chapter 11 bankruptcy is "inconceivable" for the movie-theater chain, despite the turmoil of the past few years.

The pandemic hit AMC hard as it forced the closure of movie theaters across the U.S. in March 2020. The company went from beleaguered pandemic victim to meme-stock phenomenon in 2021, and it continues to face speculation about possible bankruptcy. However, such speculation is wide of the mark, according to Aron.

-James Rogers

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04-18-24 1257ET

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