AMC Stock Trades At 'Pre Meme Historical Multiple': Can Donut Holes, Salads And Billie Eilish Help Grow Revenue?

Movie theater company AMC Entertainment Holdings AMC reported first-quarter revenue and earnings per share that beat analysts' estimates.

Here's a look at what one analyst is saying about the report and what the company is excited about outside of blockbuster movies.

Analyst Lowers Price Target: A rising market share was a positive in the first quarter, but one analyst questions profitability and balance sheet issues for the movie theater company.

Wedbush analyst Alicia Reese has a Neutral rating on AMC and lowers the price target from $4 to $3.50.

"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 analyst said AMC could increase revenue in Europe with theater upgrades boosting per-screen averages.

"However, it is unlikely to do so until it works through balance sheet right-sizing over the next two years."

Reese said a lack of a dividend and the high debt levels are reasons to be cautious on the stock.

"AMC is trading in line with its pre-meme historical multiple, albeit still at a premium to its competitors."

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

Food and Music to the Rescue?: AMC cautioned that the second quarter could have a weak performance of the overall domestic box office as the sector continues to feel the repercussions of the 2023 Hollywood Strike.

While fewer people may visit movie theaters in the second quarter, AMC is enhancing its food offerings to boost the average amount of money each guest spends on snacks and drinks.

AMC CEO Adam Aron said the company is adding new donut hole offerings in new flavors at multiple theaters in the United States.

"These things might look like donut holes to our guests, but to us, they look like incremental dollars. We expect to sell a lot."

The movie theater company is also testing more menu options at its dine-in theaters. New items include new artisan pizzas, new chicken sandwiches, a new Caesar salad and milkshakes.

AMC will now have a Caesar and Cobb salads as options at select theaters.

"It's no accident that AMC food and beverage leads the way in our industry."

Another item mentioned by Aron was the state of New York passing legislation to allow movie theaters to serve alcohol, adding an opportunity for the company in key New York locations.

The company also highlighted its retail initiatives, with AMC's popcorn celebrating its one-year anniversary recently. The company's ready-to-eat popcorn was originally offered in 550 Walmart locations and quickly expanded to 2,600 Walmart stores and the retailer's website.

"Sales have been brisk and more and more retailers have decided to carry our branded popcorn for the home," Aron said.

Aron said AMC's Perfectly Popcorn is now sold at 6,500 points of distribution with Amazon.com, Publix, and Kroger added to the distribution network. The AMC CEO said the company is pursuing adding more grocery chains for the retail item.

Another highlight from the first-quarter financial results was AMC's discussion of pursuing more musical content for theaters following the success of concert films from Taylor Swift and Beyonce. Aron said the company was in talks with several of the "world's greatest musical artists."

“That dialogue has led Billie Eilish to agree to hold a unique Listening Event next week on May 16 and 17 at many AMC theatres across the U.S. as a key part of her next album launch. Looking ahead, we expect that AMC will continue to break new ground and blaze new trails with the world’s most talented and most beloved musicians.”

Aron said the Eilish experience, which is done in partnership with Apple Music and Interscope Records, is not a concert film but an album release with visuals. Aron hopes other artists consider this theater release method to connect with fans.

AMC Price Action: AMC shares are down 7% to $2.98 on Thursday, versus a 52-week trading range of $2.38 to $54.97. AMC stock is down 94% over the last year.

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