AMC Entertainment Earnings Could Send Shares Into the Single Digits

  • The summer box office is off to a strong start for AMC Entertainment (AMC).
  • AMC stock is seeing value-friendlier improvements in front of earnings, but risks remain.
  • Shares remain in danger of further downside to possibly the mid-single digits.
AMC movie theater front glowing in the setting sun with the name shining bright red. AMC stock.

Source: Ian Dewar Photography / Shutterstock

This past week felt like a mayday call to kick off the trading month for AMC Entertainment (NYSE:AMC). Of course, AMC stock wasn’t alone. But entering the new workweek, can today’s bad actors be replaced with more heroic-like reports and offer an actionable buy-in point AMC stock for investors?

Overall, the month is off to a tricky start for Wall Street’s bulls. A quick and worried rethinking of Wednesday’s rate hike by the Federal Reserve and underwhelming monthly jobs data delivered a villainous one-two punch, with the broader market hitting fresh year-to-date (YTD) lows. And while movie theater chain giant AMC didn’t completely follow suit, it did lose just over 10% for the five-day period. And shares finished the week down by nearly 50% YTD.

Now, conditions have become a bit more frightening with AMC stock down another 6% on Monday. Still, with the start of the summer box office season just underway and earnings due after the close, is there a chance for AMC stock to be rescued?

Let’s take a look at what we know so far, off and on the price chart, and when the price of admission might have the look of a blockbuster purchase for investors.

AMC AMC Entertainment $12.85

Blockbuster Action for AMC Stock

If we’re to trust this past weekend’s box office magic, this year’s evil-like drag on AMC stock may have met its match. Disney’s (NYSE:DIS) Marvel-based sequel Doctor Strange and the Multiverse of Madness offered a massive win for AMC with estimated gross ticket sales in North America of nearly $190 million.

Ticket sales for the big-budget, sci-fi action flick more than doubled the original Doctor Strange opening weekend box office of $85 million. What’s more, it easily topped a seasonally disadvantaged but terrific open earlier this year for The Batman, which took home $134 million.

And amid rising Covid-19 cases, the film’s release is the sixth-largest all time for a movie with roughly $450 million in global sales since Wednesday’s international opening. To say the least, Doctor Strange and the Multiverse of Madness’ success bodes well for a summer movie season with highly-anticipated blockbusters such as Top Gun: Maverick, Thor: Love and Thunder, Lightyear, Jurassic World Dominion and others.

AMC Earnings Franchise and Other Concessions

While Hollywood’s sequels this summer bode well for AMC’s box office prospects, the first quarter of fiscal year 2022 earnings release for the cinema chain — and what’s likely to produce popcorn-worthy action of its own — is set to be released Monday night after market close.

In front of the report, analysts are expecting a loss of 63 cents per share for AMC stock. That would mark an earnings improvement of 55% year-over-year (YOY) from a loss of $1.42. At the same time, revenues are forecast to balloon by nearly 385% on sales of $743.43 million.

Furthermore, InvestorPlace’s Mark Hake notes AMC’s overall operations through the pandemic have improved significantly, with net cash by operating activities and free cash flow turning positive as of last year’s fourth quarter.

Coupled with its mid-cap valuation and modest price-sales ratio (P/S) of about 1.6 times next year’s sales forecast, Mark estimates a purchase could strongly benefit today’s AMC stock buyers with a price target of $20.65.

AMC Stock’s Other Motion Picture

AMC Entertainment (AMC) narrowly breached support and bearish stochastics hints at larger bearish cycle in AMC stock

Source: Charts by TradingView

In the scheme of things, a price target of just $20.65 would barely register on AMC stock’s price chart. Despite what would amount to a gain of about 60% from its current market levels, AMC stock would still be about 70% from this past year’s highs.

Importantly, Mark’s forecast is anything but trivial if investors allow themselves to look beyond 2021’s forceful, but short-lived meme stock scheming. Technically, though, AMC stock shares are at risk of making a full-blown return move towards the mid-single digits and prior to most investors ever hearing the terms meme stocks, Reddit and bullish apes.

At the moment, shares are narrowly breaking once-tested lateral and YTD support. I’m typically OK with that kind of price action, as the modest breach could act like a bear trap for AMC’s short interest of around 20%. More intolerable, the weekly chart reveals a stochastics setup that isn’t yet offering any bullish improvement out of its neutrally-placed, bearish pattern alignment.

All told, I like to root for the good guys, especially when they’re underdogs. But given AMC stock’s shaky positioning, my advice is to sit tonight’s featured show out and wait for stronger trading incentives to further develop before considering a purchase.

On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

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