AMC Entertainment Holdings Inc. (NYSE: $AMC) is a movie theater operator with over 593 theaters in the US consisting of 7,755 screens and 353 theaters consisting of 2,807 screens. It offers moviegoers an enhanced experience, including power-recliner seats and enhanced food and beverage options.Â
AMC Entertainment’s Planned Stock Sale
AMC is facing mounting challenges as it grapples with a prolonged box office slump and a significant debt burden. The company’s shares nosedived after it announced plans to sell $250 million worth of stock, raising concerns about its financial stability and ability to weather the current industry headwinds.
Box Office Downturn Bites
The movie theater industry has been struggling to regain its pre-pandemic momentum, with ticket sales in the US and Canada stubbornly lagging behind 2023 levels. According to researcher Comscore Inc., North American ticket sales were down almost 10% through last weekend compared to the same period in 2023. This downturn has severely impacted AMC’s financial performance, as evidenced by the company’s recent earnings report.
In February, AMC reported fourth-quarter profit that missed analysts’ estimates, underscoring the company’s shaky finances since the pandemic. AMC’s EBITDA came in at $42.5 million, falling short of the $46.7 million analysts had projected. Higher interest payments increased the company’s cash burn in the period, according to Bloomberg Intelligence analyst Geetha Ranganathan.
Debt Woes and Lender Concerns
AMC Entertainment’s debt burden has been a significant source of concern for the company and its stakeholders. As of the end of the fourth quarter, AMC had approximately $4.6 billion in long-term debt, with $3 billion coming due in 2026. This looming repayment obligation has prompted AMC’s senior lenders to meet and discuss potential solutions to bolster the company’s balance sheet.
According to people familiar with the matter, senior lenders to AMC met by phone on Friday to weigh their options, including potentially making a proposal to AMC on how to tackle the debt issue. The deliberations are still in the early stages, and no final decision has been made.
The lenders’ growing concern is understandable, given the weak slate of movies expected from Hollywood this year. Without a substantial improvement in the box office performance or a successful debt restructuring, AMC’s financial situation could become increasingly precarious.
AMC Entertainment’s 2024 Guidance And Outlook
For the fiscal year ending June 30, 2024, AMC expects adjusted earnings per share of 67 to 71 cents. This includes a low-single-digit percentage decline to a low-single-digit percentage increase in underlying business performance, offset by benefits from share repurchases and negative impacts from higher interest, tax expenses, and the sale of its Russian business.
The company forecasts adjusted free cash flow of $850 million to $950 million, representing solid growth over fiscal 2023. It expects a mid-single-digit percentage lower adjusted EPS in Q3 2024 compared to Q3 2023 but a mid-single-digit percentage increase in Q4 2024 over Q4 2023. AMC plans to allocate approximately $70 million toward share repurchases.
Investor Sentiment
AMC’s stock has taken a beating in recent months, reflecting investors’ concerns about the company’s prospects. After trading as high as $450 during the pandemic-era “meme stock” frenzy, AMC’s shares closed at $4.08 on Friday.
The recent announcement of a $250 million stock sale further exacerbated investor worries, with AMC’s shares tumbling by more than 14% on the news. The move was seen as a desperate attempt to raise cash and shore up the company’s financial position, highlighting the depth of its challenges.
Despite these concerns, AMC’s CEO, Adam Aron, has remained optimistic, courting retail investors and exploring alternative revenue streams. In 2023, AMC launched AMC Theatres Distribution, releasing concert films featuring artists like Taylor Swift and BeyoncĂ©, with plans to expand this initiative in the coming years.
Diversification and Innovation Efforts
In addition to its foray into concert film distribution, AMC has been pursuing several other avenues to diversify its revenue sources and enhance its offerings. The company recently announced a strategic collaboration with Zoom Video Communications, Inc., introducing “Zoom Rooms at AMC” at several locations across the country.
This innovative initiative allows businesses and organizations to leverage AMC’s state-of-the-art facilities and Zoom’s collaboration platform for interactive, hybrid events and meetings. By tapping into the corporate meetings and events market, AMC aims to generate additional revenue streams and maximize the utilization of its theaters.
Additionally, AMC has expanded the availability of its popular grocery store popcorn through partnerships with major retailers like Publix, Kroger, and Amazon.com. This move not only capitalizes on the strong demand for AMC’s popcorn but also extends the company’s brand reach beyond the confines of its theaters.
AMC Entertainment’s Stock Performance
AMC Entertainment Holdings stocks took a significant hit today, March 28, plunging 14.29% to close at $3.7200. This sharp decline reflects investors’ concerns over the company’s future prospects amid the challenges it faces in the movie theater industry.
The steep drop in AMC’s stock price underscores the market’s skepticism about the company’s ability to navigate the box office downturn and address its mounting debt burden effectively.Â
Should You Buy AMC Stock in 2024?
Considering AMC’s current challenges, potential investors should approach the stock with caution in 2024. The company faces significant rough times, including a prolonged box office slump, a substantial debt burden of $4.6 billion with $3 billion due in 2026, and mounting concerns from lenders about its financial stability.
AMC’s recent $250 million stock sale announcement triggered a sharp decline drop in its share price, signaling the market’s skepticism about its future. While AMC is exploring diversification strategies and innovations like concert film distribution and Zoom Rooms, the success of these efforts remains uncertain. Unless AMC can effectively address its debt concerns, achieve a substantial turnaround in box office performance, and regain investor confidence, the stock may continue to be a risky investment proposition in 2024.
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