AMC Entertainment Analyst Cautious Despite Market Share Gains, Europe Catalyst: 'Heavy Debt Load, Lack Of Dividends Overshadow These Positive Factors'

Shares of movie theater chain AMC Entertainment Holdings AMC traded higher Friday after the company pre-announced first-quarter financial results.

Wedbush analyst Alicia Reese recently shared commentary on the movie theater company and why she remains on the sidelines.

The Analyst: Reese maintains a Neutral rating and $4 price target on AMC Entertainment Holdings. The price target is based on a multiple of 7x EV-to-EBITDA for 2026 estimates.

The Takeaways: AMC realized strong market share gains throughout 2023. Rising expenses also factored into the company's storyline, Reese noted.

"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," Reese said.

The Adam Aron-led company also has an opportunity to see revenue growth in Europe. Theater upgrades that could increase per-screen averages.

However, Reese does not expect this upgrade to happen until the balance sheet improves.

"The company's heavy debt load and lack of dividends overshadow these positive factors, but AMC is focused on alleviating its debt,” she said.

AMC raised over $865 million in 2023 via equity sales. More share issuances are likely.

The Leawood, Kansas-based company “must cover its interest payments and leases while chipping away at the $3 billion in debt repayments coming due over the next three years while renegotiating the rest,” Reese said.

AMC shares have fallen back to its "pre-meme historical multiple," she adds. While the stock trades at a premium to competitors and the company has potential for growth on the international circuit, “this is tempered by its inability to expand or upgrade with its debt load."

The analyst expects 2024 box office to be flat year-over-year. A rebound should come in the second half of the third quarter.

Related Link: AMC Entertainment Q4 Earnings Highlights: Revenue Beat, EPS Beat, ‘Stunning’ Results From Taylor Swift, Beyonce Films

What's Next: AMC will report first-quarter financial results after the market closes on May 8, 2024.

The company's pre-announced results showed first-quarter revenue of $951.4 million, which is ahead of a Street consensus estimate of $861.1 million according to data from Benzinga Pro. This would mark a 12^th straight quarter of beating revenue estimates from analysts.

A loss of 62 cents per share pre-announced by the company is also ahead of a Street estimate of a loss of 79 cents per share.

"As predicted, the box office in the first quarter was adversely impacted by the 2023 Hollywood writers and actors strikes. Nonetheless, AMC outperformed," Aron said.

Hollywood strikes from 2024 continue to impact the second-quarter box office.

"We are ebullient about the upcoming film slate, and we expect to see an increasingly strong box office as the year progresses."

Data from BoxOfficeMojo shows the first quarter domestic box office totaling $1.61 billion, which was down 6.6% year-over-year.

Price Action: AMC shares are down 6% to $3.20 on Monday versus a 52-week trading range of $2.38 to $62.30. Shares of AMC are down 93% over the last year and down 44% year-to-date in 2024.

Read Next: Global Box Office 2024 To Decline 5% In 2023: Bad News For AMC, Cinemark?

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