While most of the market awaits Disney (DIS) or any of the other larger companies that release third-quarter results on Tuesday. A fairly large cohort of long-time shareholders remains focused on AMC Entertainment (AMC). The cinema chain, best remembered for its dastardly short squeezes in early 2021, will release its Q3 figures after the close.
Wall Street is expecting a $-0.25 adjusted earnings per share (EPS) bottom line number and $961 million in sales. The midterm elections, no matter the results, typically have a positive impact on markets and will take place all day Tuesday.
Citi analyst Jason Bazinet reaffirmed his Sell rating on AMC stock on Monday. Bazinet cut his $3.13 price target to an even worse $1.20. With AMC’s debt load running about 20 times the annualized EBITDA of its most recent quarter, fewer and fewer Wall Street analysts are willing to put a positive spin on it. AMC had about $5.4 billion in debt at the end of the second quarter. The market will be interested to know how much debt AMC is carrying at the end of the third quarter.
Bazinet’s outlook is interesting since AMC chose Citi to sell up to 425 million of its APE preferred units several months ago. APE preferred units, which were handed out to shareholders as a dividend during the summer, closed Monday at $1.51, so it seems a sale of the entire allotment would not have made much of a dent into that debt pile. APE units were introduced to allow AMC Entertainment CEO Adam Aron to dilute existing shareholders without putting it up for a vote. When he had tried to sell more AMC shares earlier, shareholders had voted the measure down.
As APE units could eventually be turned into AMC shares, the introduction of APE units has been met with a sharp drop in the value of AMC stock. AMC stock is down 80% for the year at the moment, but much of that has only happened since mid-August when Aron introduced the new APE units after AMC shares surged above $25.
The $-0.25 EPS expectation is much better than the $-0.44 EPS loss in Q3 2021, but this is still not anywhere near profitability. The market will also want to see an EBITDA figure above the second quarter’s $68 million. Beyond talk of debt and dilution, shareholders will focus on attendance. Q2 saw attendance hit 59 million. The third quarter likely hinged on attendance for the Dwayne Johnson-helmed Black Adam superhero drama.
Otherwise, Aron and the company will likely talk about the company’s new partnership with Zoom Video Communications (ZM) to convert unused screens at cinemas into Zoom Rooms that can be rented to outside parties for video-based conferences and corporate meetings. Additionally, executives will likely mention the six new cinemas opened in Saudi Arabia.
Simply put, AMC stock weekly chart looks horrendous. A beat could send shares higher, but in this current macro environment and after the fallout over APE units it sure seems unlikely. The $4.50 level could provide some respite in the case of a poor result or worse guidance. $4.50 worked as resistance in June and August of 2020.
Below there sits the near-bankruptcy price level of $1.20. This is where AMC moved throughout 2020 when the market thought bankruptcy was likely. Even at its current $5 level, AMC stock is not yet in oversold territory.
An earnings beat would likely send the stock up to $6.50, which is where the 8-week moving average is. Additionally, this is the level where AMC began finding resistance throughout October. A major beat or improvement in guidance could see shares bounce up to resistance at $11, but that seems less likely. Of course, markets like when midterm elections are in the rearview mirror, so a general marketwide rally might aid bulls over the rest of November.