Analyst Says Sell AMC Entertainment, Sets Target Of One Penny

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.

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