AMC Entertainment Holdings (NYSE:AMC) is on its knees again. AMC stock is down over 56.6% YTD and off over 80.6% from a year ago when it peaked at $60.73.

The country’s largest movie chain has to hope that the new summer viewing season will be a huge blockbuster box office season. Certainly the Top Gun: Maverick movie from Paramount starring Tom Cruise has helped it get off to a good start. As of Jun. 16, it grossed over $415.9 million just two weeks from release on Memorial Day, according to The Numbers.

And there is no question that the number of large budget films and movies, in general, will top that in 2022. For example, there were 403 total films released in 2021, up slightly from 334 in 2020, according to Statista. That is down from 792 in 2019 and 873 in 2018. This year alone, the film industry it set to easily top the 2021 number, which will flow straight into revenue at AMC Entertainment.

Forecasts for AMC

For example, analysts now project revenue will hit $4.4 billion, up from $2.53 billion last year or 73.9% year-over-year. More importantly in 2023, analysts project revenue topping $5.2 billion, up 18.2% in 2023 over 2022.

That should lead to the company becoming free cash flow (FCF) positive, recession or not. AMC produced less than stellar results on May 9 for the quarter ending Mar. 31. The movie chain reported that FCF was negative $329.8 million. That is not good for AMC stock, at least in the near term.

The reason is that it needs to pay down debt to get rid of its $82 million in quarterly interest expenses. AMC Entertainment still has gross debt of $5.522 billion. After cash and cash equivalents of $1.165 billion, its net debt is $3.84 billion. Without positive FCF, it won’t be able to pay down debt and begin paying a dividend to shareholders.

For example, analysts are still projecting negative earnings not only for 2022, but also for 2023. Without positive FCF, it won’t get back into the black earlier.

Moreover, it has been over two years since the company has paid a dividend. That is what helps the stock stay stable in rough periods like we are going through now. The last dividend it paid was in first-quarter (Q1) 2020, and that was severely reduced from Q4 2019.

What to Do With AMC Entertainment

The average price target of seven analysts covered by Refinitiv is $9.95 per share. That is over $2 below AMC stock on Jun. 16 at $11.79. Analysts just don’t see a turnaround happening anytime soon.

Maybe it makes sense to see if the stock will float down further. I don’t see that there is any plan for the company to start producing positive FCF. In fact, the latest reports on the stock have been downgraded by several analysts.

All eyes will be on the upcoming quarterly report probably by the end of July. Analysts are looking for good news and for reasons to change their opinion on the future forecasts, or frankly to change their models on the company.

What AMC Stock Is Worth

This is probably too pessimistic. As I pointed out last month, with just a 5% FCF margin, when revenue is forecast to hit $5.26 billion, AMC will generate $263 million in FCF. Here is how this affects the valuation of AMC stock.

If we use a 3% FCF yield metric to value AMC stock, the target market capitalization (cap) works out to $8.766 billion. This is because using a 3% FCF yield is the same as multiplying the FCF estimate by 33.3 times. So $263 million x 33.3 equals $8.766 billion in target market cap.

That number is 44.9% over AMC’s market cap of $6.05 billion on Jun. 16. That implies that AMC stock is worth about $17 per share (i.e., 44.9% higher than the $11.79 price today).

In other words, a slight increase in its FCF margin will bring a huge gain in AMC stock. Analysts will be looking to see if that is getting close to happening with its Q2 results.

On the date of publication, Mark Hake did not hold (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 InvestorPlace.com Publishing Guidelines