AMC Entertainment Stock Is Falling: What's Going On?

AMC Entertainment Holdings Inc AMC shares are trading lower. Roth MKM released an update on the stock Wednesday, suggesting further downside. 

What Happened: Roth MKM analyst Eric Handler reiterated AMC with a Sell rating and a price target of 50 cents, citing an "upside down capital structure."

Although the analyst noted that EBITDA is improving, the company is still burning through cash, he said. 

"Cash burn remains an issue and AMC continues to issue shares to maintain a comfortable liquidity level. AMC still trades at a substantial premium to historical multiples and the dilution from equity issuances is offsetting improving box office results," Handler said in a new note to clients.

Roth MKM continues to believe that shares are trading "at an irrational valuation." The analyst argued that AMC would need to generate $978 million of adjusted EBITDA to justify its current price, which is 78% higher than Handler's forecast for 2024 and 5% higher than AMC's all-time adjusted EBITDA high of $929 million in 2018. 

On the positive side, box office momentum continues to show strength and liquidity concerns have been alleviated after the court approved AMC's revised stock conversion plan last week. 

A 10-for-1 reverse stock split will go into effect on Aug. 25. APE units will be converted to common stock, increasing the total number of authorized shares of AMC's Class A common stock from approximately 524.2 million to 550 million.

"Management will also initiate an ATM program for the sale of up to 25mn shares, which we believe will be immediately tapped to take advantage of a more attractive post-reverse split share price," the Roth MKM analyst said. 

See Also: AMC Shares Tank On APE Conversion Plans: Analysts, Jim Cramer And More Say It's 'A Clearer Path For AMC To Survive'

AMC Price Action: AMC shares are down more than 28% over the last five trading sessions. The stock was down 4.62% at $3.50 at the time of writing, according to Benzinga Pro.

Photo: samantha celera from Flickr.