Since the COVID-19 pandemic struck, AMC Entertainment (AMC) has received a box filled with challenges. The world’s largest movie theater chain saw its revenues plummet from $5.02 billion in 2019 to just $1.07 billion in 2020. AMC was on the brink of collapse, with theaters closed and moviegoers confined to their homes. However, the company stayed afloat through strategic moves, including raising $3.5 billion through equity issuance.
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In response to these struggles, AMC made key operational shifts to increase revenue. The company invested heavily in enhancing the theatrical experience with premium large-format screens, expanded laser projection, and upgraded seating. Additionally, AMC diversified its revenue streams by expanding its home popcorn business. These efforts were aimed at attracting more moviegoers and improving financial stability.
A few days before the company discloses its Q4 earnings, one four-star analyst thinks the sun will shine favorably on AMC in 2025.
One Analyst’s (Cautiously) Optimistic View
Despite AMC being caught in a meme spiral, which has made the stock volatile and possibly unreliable, Benchmark analyst Mike Hickey has a cautiously optimistic view of AMC’s future. He described 2024 as “a year of surprising resilience” for the domestic box office, which delivered $8.56 billion, down 3.9% from 2023 but still surpassing expectations. Hickey believes AMC is positioned for a multiyear recovery, driven by a strong film slate in 2025. “We believe AMC is positioned for a multiyear recovery, with 2025 likely to surpass 2024 driven by a strong film slate that includes ‘Mission: Impossible 8,’ ‘Jurassic World 4,’ and ‘Avatar 3,'” Hickey noted.
Hickey also highlighted the risks associated with AMC’s substantial long-term debt and ongoing liquidity management efforts. As of the third quarter, AMC had long-term debt of approximately $4.5 billion following its debt-reduction efforts. The company has made strides in managing its debt by pushing $2.4 billion of its long-term debt maturities from 2026 to 2029 and 2030, reducing near-term refinancing risk. Additionally, AMC lowered its total debt by approximately $349 million in 2024 through buybacks and exchanges.
Despite these efforts, Hickey emphasized that the financial obligations continue to be a significant consideration. He pointed out that while AMC has benefited from an improving box office, the company’s substantial debt load and the need for ongoing liquidity management pose certain risks. Hickey’s analysis underscores the delicate balance AMC must maintain between leveraging its recovery and managing its financial challenges.
Is AMC a Buy or a Sell?
Well, Neither. On Wall Street, AMC is considered a Hold. The average price target for AMC stock is $3.63, implying a 2.25% upside potential.
