AMC Entertainment’s preliminary fourth-quarter total revenue of $1.17 billion topped expectations for about $1.09 billion.
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AMC Entertainment Holdings on Tuesday gave investors positive news about its underlying business, and its shares turned higher. That’s how things are supposed to work—at least outside the realm of meme stocks.
AMC stock (ticker: AMC) rose 9.7%, to $17.62 in Tuesday morning trading after the movie theater firm released preliminary, unaudited financial results for the fourth quarter that were mostly ahead of expectations. The S&P 500 rose 0.1% and the Dow Jones Industrial Average rose 0.1%.
Shares of GameStop (GME), another name popular among retail investors who organize on sites like Reddit, rose 2.1%, to $111.20. AMC and GameStop have often traded in tandem since May of 2021; GameStop’s smaller move is a departure that could signal AMC is trading on fundamental news, rather than simply meme momentum.
The timing is fortuitous: Meme stocks have struggled in 2022, with AMC falling 38% year-to-date and GameStop dropping 25%.
AMC’s preliminary fourth-quarter total revenue of $1.17 billion topped expectations for about $1.09 billion, and were well ahead of the $162.5 million AMC reported in the fourth quarter of 2020. Both ends of the firm’s expected range for adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, were well ahead of expectations for $82 million.
Benchmark analyst Mike Hickey wrote Tuesday that AMC delivered a “huge beat.”
“The quarter was AMC’s strongest in 2 years and reaffirms our belief the domestic box office continues to bounce back from the pandemic influenced downturn,” Hickey wrote. “AMC was very profitable on an [adjusted Ebitda] calculation and delivered strong positive cash flow.”
Hickey has a Hold rating with no price target on AMC shares. He notes that the current valuation compared to movie chain peers remains extreme. Still, AMC has raised significant cash that should allow them to persist and pay down debt, Hickey adds.
B.Riley Securities analyst Eric Wold wrote in a note to clients Tuesday that AMC’s “strong cash flow bodes well for debt refinancing plans.” He maintained a Neutral rating and $16 price target.
“We believe that AMC management successfully took advantage of the upwardmove in the share price in early- to mid-2021 and has now built a cash balance that not only took imminent bankruptcy out of the conversation, but provides for multiple opportunities to improve the company’s outlook—both in the core exhibition operations and through the expansion into new arenas,” Wold wrote.
While he thinks the domestic industry box office isn’t likely to return to pre-pandemic levels until 2023 or 2024, Wold expects a robust spring and summer film slate to prove that Spider-Man: No Way Home wasn’t just a one-off success.
Still, not all analysts were so upbeat. Wedbush analyst Alicia Reese told Barron’s she viewed the cash balance decline of $20 million as the most positive takeaway, given during the quarter the company made deferred lease payments of $53 million and a cash interest payment of $158 million.
“All in all, this is not an unusual result for AMC relative to Street expectations,” Reese wrote in an email. “That said, AMC management knows its primary shareholders well and gets in front of them as often as possible because shares often rally with any positive or seemingly positive news. AMC’s remaining retail shareholders are committed and want to believe in the story, so AMC continues to deliver consistent positive communication to them.”
Write to Connor Smith at [email protected]
