Citigroup recently dropped its price target on AMC Entertainment (NYSE:AMC) from $15.50 to $4.75 per share, reiterating a “sell” rating for shares. AMC stock fell almost 3% on the news yesterday.
Shares opened today, Sept. 27, at $7.95 per share and a market capitalization of about $1.25 billion. The price of AMC stock has been slashed more than 50% since AMC absorbed its APE preferred shares as common stock and executed a 1-for-10 reverse stock split a month ago.
The bad news on the analyst front was offset against the end of the writers’ strike. However, Hollywood still hasn’t settled the current strike by actors.
Saving AMC Entertainment
Saving AMC Entertainment, the largest U.S. theater chain, may be more important to Hollywood than ending the strike. Without theaters, movies have no distribution other than streamers, which pay a relative pittance.
Since the pandemic, AMC CEO Adam Aron has been in extreme survival mode, selling stock and debt to keep the chain alive while waiting for product. This has included rooting for small traders squeezing institutional short sellers. It has also meant selling more shares and resulted in the creation of the APE preferred shares.
The 2021 frenzy that helped AMC fight the shorts — and which led to the takeover of GameStop (NYSE:GME) — became the movie Dumb Money, which opens this weekend.
Now, while waiting for the writers to turn out new blockbusters like Barbie, Aron has hit upon a new plan to fill seats: Concert films. This will start next month with Taylor Swift | The Eras Tour, but the hope is more will follow.
What Happens Next?
Adam Aron seems to have achieved his goal. AMC lives. But AMC stock is not the investment it once was.
Before the pandemic, AMC Entertainment was a stable, dividend-yielding stock with $5 billion in annual turnover. Now, it’s a debt-laden operation with 20% less revenue, subject to the costs of new technology and more competition than ever from people’s living rooms.
On the date of publication, Dana Blankenhorn 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.
