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AMC Explodes 301% After $305M Share Sale; Street Says Hold

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support@smarteranalyst.com (Ben Mahaney)
·3 min read
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Shares of AMC Entertainment exploded 301% on Jan. 27 fueled by investor optimism that the cash-strapped movie theatre operator is on the right track to avert bankruptcy. The stock dropped 27% in Thursday’s after-market trading session.

Amid the share frenzy, AMC (AMC) completed a previously announced at-the-market equity program for 50 million shares of its class A common stock, at an average price of $4.81 per share, the company said on Jan. 27. The stock is up a whopping 570% over the past five days, taking the monthly gain to 821%.

“Together with the remaining shares under a prior program, since the Company’s January 25, 2021 announcement, the Company has sold in aggregate 63.3 million additional shares of its Class A common stock for additional proceeds of $304.8 million,” AMC stated.

The stock rally comes after AMC CEO Adam Aron announced earlier this week that “any talk of an imminent bankruptcy for AMC is completely off the table,” after the theatre chain operator secured $917 million in fresh capital to fund its financial needs “deep into 2021.”

The stock has now erased all of last year’s losses as the theater operator is still grappling with the financial fallout from the pandemic-led closures of its cinemas. (See AMC stock analysis on TipRanks)

Meanwhile, B. Riley Financial analyst Eric Wold raised the stock’s price target to a Street-high price target of $5.50 (72% downside potential) from $3.50, but maintained a Hold rating, calling the company’s recent financing announcements “positive.”

“We understand that the pandemic provided an opportunity for AMC management to evaluate every dollar going out the door and reevaluate all aspects of the business,” Wold wrote in a note to investors. “With that in mind, we expect the combination of more efficient labor utilization, optimization of operating hours/showtimes in the midweek period, and an enhanced push around the company's AMC Stubs A-List subscription program to drive stronger theatre-level EBITDA margins coming out of the pandemic and heading into the stronger film slates of 2021-2023 as moviegoers return to the theatres.”

The analyst believes that the industry can return to pre-pandemic levels by 2023, and therefore, expects 2023 revenue and AEBITDA estimates of $5.731 billion and $779 million, respectively.

“While our new 2023 estimates are based on an AEBITDA margin that is still below what was achieved in 2018 and 2019, we believe this could provide an opportunity for upside should our revenue projections prove accurate,” he added.

Coming now to the rest of the Street, the consensus is a Hold based on 4 recent Hold ratings versus 1 Sell rating. That’s with an average analyst price target of $2.89, which implies 85% downside potential over the coming year.

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