Proactive Investors - AMC Entertainment Holdings (NYSE:AMC) shares traded more than 11% lower on Monday after the company revealed preliminary, unaudited first quarter financial results along with a warning about the continued negative impact of the dual 2023 Hollywood writers and actors strikes on box office returns.
For the quarter ended March 31, 2024, AMC said it expects to report revenue of $951.4 million, down slightly from $954.4 million in the year-ago quarter.
It narrowed its net loss from 235.5 million or $1.71 per share to $163.5 million or a loss per share of $0.62.
Both figures were better than Wall Street estimates, with analysts on average expecting a loss per share of $0.79 on revenue of $883.6 million, however, investors were discouraged by the cinema chain CEO's warning about the continued drag of last year’s strikes on its performance.
“As predicted, the box office in the first quarter was adversely impacted by the 2023 Hollywood writers and actors strikes,” CEO Adam Aron commented.
“While we anticipate that the second quarter box office will continue to be affected by the 2023 Hollywood strikes, we are ebullient about the upcoming film slate, and we expect to see an increasingly strong box office as the year progresses.”
Analysts at Wedbush believe the pre-announcement implies higher market share due to the outperformance of Dune 2 on AMC’s IMAX screens in addition to higher expense ratios than were previously assumed.
They also highlighted that, as of April 25, AMC has sold 12.8 million shares for $41.8 million of its at-the-market $250 million equity program.
“It has also been reported via Bloomberg that AMC’s lenders have proposed a debt extension for AMC’s $4.5 billion in debt, $2.9 billion of which is coming due in 2026,” they pointed out. “This is a key initiative as AMC looks to clean up its balance sheet in the coming years.”
The analysts wrote that, similar to CEO Aron’s thinking, they expect the box office to strengthen as the year progresses.
“Our current estimates for the 2024 box office are relatively flat year-over-year, with a strong rebound coming in the second half of Q3 2024,” they wrote. “Our 2025 estimates are conservative on both the industry level and AMC’s market share.”
The analysts noted that their model does not include any alternative content such as concert movies in 2024 or 2025, as none have been announced, but that they expect this to potentially lift its results materially from their current estimates.
The Wedbush analysts have a ‘Neutral’ rating on the stock and a $4 price target, based on a 7x enterprise value to earnings before interest, taxes, depreciation, and amortization (EBITDA) multiple on their 2026 estimate.
“This is a premium to competitors as AMC has more potential for growth and upgrades in its international circuit; however, this is tempered by its inability to expand or upgrade with its debt load,” they wrote.
AMC shares traded down 11.1% at $3.03 at noon on Monday.
The company will report its full financial results for the first quarter after the stock market closes on Wednesday, May 8, 2024.