AMC Entertainment stock jumped over 15% at open in a down market Wednesday at open after execs outlined global opening plans at a conference call late yesterday afternoon. Share had popped by over 17% in premarket trade.
It’s been a roller coaster – mostly down – for AMC shares since the coronavirus pandemic forced it to shutter theaters worldwide in mid-March. The stock was under two bucks at one point but is changing hands at over $6 this morning as investors shrugged off a huge first-quarter loss swelled by non-cash writedowns. Executives sounded upbeat about opening globally almost everywhere in July to roll out the summer’s first big post-COVID theatrical pic, Tenet. The strapped exhibitor, the world’s biggest, continued to project a cash runway through the Thanksgiving holiday and also said it’s hashed out favorable deals with landlords.
The shares had rallied last week to pre-coronna highs but dropped Tuesday ahead of earnings, which were announced after market close.
Wall Street analysts, however, remained cautious, with Eric Wold of B Riley FBR focusing on how receptive consumers will be to returning to theaters, how robust the film slate remains, and the level of impact from attendance restrictions. He’s staying neutral on the stock but raised his price target from $4 to $5 a share given its recent runup.
Jim Goss of Barrington Research said “significant uncertainty remains for the company” due to the high degree of leverage in its business model. He noted that free cash flow – a key metric — in recent years was already insufficient to meaningfully address roughly $5 billion in debt, even prior to the additional challenges posed by COVID-19. He’s not recommending a ‘buy’ either, saying investors should be able to find better options in the space.
He did note that, as per executive comments on the call, last year AMC operated at 17% capacity utilization across its circuit — indicating only a minority of showtimes would be impacted by even 25% attendance caps due to social distancing guidance.
AMC’s net losses swelled to $2.18 billion, including a giant $1.8 billion in non-cash impairment charges, for the first quarter of the year from a negative $130 million the year before in what CEO Adam Aron yesterday called “unprecedented times.” Revenue dropped 22% to $941 million from $1.2 billion for the three months ended in March. Free cash flow was a negative $275 million versus negative $113 million.
But Aron described an extremely solid peformance for the months and weeks before the pandemic hit as well as oncerted cost cutting and a massive push with landlords to have first quarter rent forgiven or payments reduced in some deals that may extend into the rest of this year or beyond.