LightShed Partners analyst Rich Greenfield initiated coverage of AMC Entertainment (AMC) with a Sell rating and 1c price target. The analyst believes that while the future of movie-going is not in doubt, "the future of AMC Theaters is very much in doubt." Further, he sees "a substantial disconnect" between the future of movie theater attendance and AMC's earnings power compared to the company's current enterprise value and "over-levered capital structure."
SELL AMC: LightShed Partners analyst Rich Greenfield initiated coverage of AMC Entertainment with a Sell rating and 1c price target. While he contended that the "future of movie-going is not in doubt," Greenfield argued that "the future of AMC Theaters, however, is very much in doubt, with its current stock price dramatically overvalued." He sees "a substantial disconnect" between the future of movie theater attendance and AMC's earnings power compared to the company's current enterprise value and "over-levered capital structure."
Further, the analyst argued that as he thinks about 2022, he has "difficulty believing" that adjusted EBITDA can meaningfully exceed $600M. Mask policies may deter some moviegoers and not all segments of the population will be eager to sit in theaters next to people of whom they do not know the vaccination status, said Greenfield. The "elephant in the room" is the shattering of theatrical release windows, he added. With dramatically shorter release windows between theatrical openings and various forms of home entertainment releases, not to mention a continued steep ramp in straight-to-SVOD movies, the analyst believes forecasting 2022 domestic AMC admissions-per-screen down high single-digits versus 2019 and international AMC admissions-per-screen flat versus 2019 is aggressive. "It honestly feels like it could be meaningfully worse," Greenfield said.
Overall, if attendance fails to rebound as the analyst expects, not to mention declines long-term as release windows shrink and consumer behavior evolves, he suspects AMC will need to issue even more equity in the future, meaningfully diluting current equity holders to stay afloat.
NYC REOPENING: This past weekend, movie theaters in New York City reopened their doors after almost a year since the COVID pandemic shut them down. New York Governor Andrew Cuomo allowed theaters to operate at 25% of their maximum capacity, with no more than 50 people per screening.
In a statement following Cuomo's decision, AMC said it would reopen all 13 of its theaters in New York City beginning March 5. "Since reopening our first theatres with AMC Safe & Clean in August, AMC has welcomed back nearly 10 million moviegoers nationwide without a single reported case of COVID-19 transmission among moviegoers at our theatres. We look forward to welcoming back our New York City guests to the big seats, big sounds and big screens that are only possible at a movie theatre," the company added.
PRICE ACTION: In morning trading, shares of AMC have gained almost 8% to $11.35.
AMC Entertainment
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