AMC Entertainment Holdings Inc. is poised for a surge in shares as it reveals its fourth-quarter results, according to projections from analyst firm Wedbush. However, despite this optimistic forecast, Wedbush analyst Alicia Reese warns of a potentially “tumultuous” 2024 for the movie theater chain.
In a recent note, Reese emphasized AMC’s successful expansion of market share in 2023 and its potential to maintain or even augment its current 22% market share. This positive trajectory is credited to the widespread network of premium large-format screens and the distribution of concert films. Reese also highlighted the prospect of revenue growth in the European circuit, underscoring potential theater upgrades that could boost per-screen averages.
“The success of concert films such as ‘Taylor Swift: The Eras Tour’ and ‘Renaissance: A Film by Beyoncé’ significantly contributed to AMC’s share gains,” noted Reese. AMC likely secured a larger market share in the fourth quarter of 2023 by screening these films across its circuit and the global circuits of competitors.
Analysts surveyed by FactSet anticipate AMC reporting a fourth-quarter loss of 57 cents per share and revenue of $1.058 billion. However, despite these positive projections, Reese cautioned about potential challenges in 2024, foreseeing “pockets of strength offset by volume holes.”
Reese estimated a 7% year-over-year decline in the North American box office to $8.3 billion in 2024, following a remarkable 21% year-over-year rise in 2023. This decline, Reese attributed to the effects of the SAG-AFTRA strike, caused delays in the release of several titles.
Looking forward, Wedbush expects AMC to potentially face a first-quarter EBITDA loss due to a soft slate in the initial two months. However, this is expected to be partially mitigated by a strong March, with the latest “Dune” movie likely performing well on IMAX Corp. screens, especially given AMC’s extensive domestic IMAX footprint.
Despite the positive outlook, Reese expressed concerns about AMC’s debt load and the absence of a dividend. With AMC’s net debt at $4.095 billion, Wedbush maintains a neutral rating and a $6 price target for the movie theater chain. Reese stressed that while sentiment towards AMC is positive, it’s dampened by the heavy debt load and lack of dividends, despite the stock trading more in line with its historical multiple.
To tackle its debt burden, AMC completed an at-the-market equity offering in December, raising approximately $350 million. This move aimed to reduce the company’s liabilities, which exceeded $5 billion in 2022. However, Wedbush anticipates that AMC will likely continue issuing shares to manage its debt and prepare for upcoming repayments over the next three years.
Currently, AMC shares have declined by 33.9% in the last three months, in contrast to the S&P 500 index’s gain of 12%. Though there has been some recovery from the record closing low in February, it remains far below the peak of the meme-stock frenzy in June 2021 when AMC shares reached an all-time high of $339.05.
CEO Adam Aron has acknowledged the current state of affairs and pledged to provide insights during the upcoming fourth-quarter earnings call scheduled for February 28. In a tweet earlier this month, he acknowledged the detrimental impact of the actors’ and writers’ strikes in 2023 on the early 2024 box office.
In comparison, AMC’s rival, Cinemark Holdings Inc., recently reported a wider-than-expected fourth-quarter loss, despite surpassing analysts’ revenue expectations. The broader industry landscape indicates challenges and uncertainties that AMC will need to navigate in the coming year.
