AMC Entertainment (NYSE:AMC) stock is in the spotlight after Roth MKM analyst Eric Handler lifted the company’s second-quarter revenue estimate to $1.012 billion from $946 million, implying a year-over-year (YOY) decline of 25%. The analyst’s estimate is just below the consensus analyst estimate for $1.018 billion.
Handler also raised his Q2 adjusted EBITDA estimate to $7 million from a loss of $54 million. That’s well above the consensus analyst estimate for a loss of $7 million.
Handler raised these estimates following a box office rally attributed to the success of Inside Out 2. The movie has grossed $1.37 billion and is the top movie of 2024 thus far. Dune: Part Two trails in second place with a box office of $711.84 million.
“Sequential improvement is anticipated in 3Q and a return to y/y growth is forecast for 4Q,” said Handler. “In addition, the box office still appears positioned for a 2-year cyclical upswing in 2025-2026.”
Handler reiterated his price target of $4 and a “sell” rating. His price target is based on a ~8x EV/EBITDA multiple for 2025.
AMC Stock: Roth MKM Raises Q2 Revenue and Adjusted EBITDA Estimates
Despite the raises, Handler expects Q2 domestic revenue to fall by 25% and international revenue to fall by 23%. He also expects a 26% drop in U.S. attendance and a 25% drop in international attendance.
For the third quarter, Handler expects the movie theater chain to report revenue of $1.32 billion and adjusted EBITDA of $152 million. Both of these figures top the consensus analyst estimate for revenue of $1.29 billion and adjusted EBITDA of $137 million.
“They predict that the Q3 box office will decline by 6% year-over-year but will show quarter-over-quarter growth, marking the high point for 2024 on an absolute basis,” wrote StreetInsider.
As evident by his “sell” rating, Handler remains cautious on AMC stock. The analyst cites the company’s high debt load, limited free cash flow (FCF) potential and generous valuation.
On the bright side, he believes that AMC will be able to pull in around $125 million of FCF during the second half of the year, lowering the chances for an equity raise.
On the date of publication, Eddie Pan 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
