AMC Entertainment’s (AMC) seemingly positive earnings reported depended heavily on the Barbie movie.
AMC Entertainment disappointed investors with another stock offering.
Investors should be very cautious with AMC stock.
Plenty of fans, known as “Apes,” are rooting for AMC Entertainment (NYSE:AMC) to succeed in 2024. That’s all fine and well, but AMC stock is on a downtrend and the best grade we can give it is a “D.” It’s not an insult to the company or the “Apes,” but only an assessment that AMC Entertainment doesn’t offer a favorable risk-to-reward balance to the shareholders.
Some folks, including AMC Entertainment CEO Adam Aron, might claim that the company is staging an excellent post-pandemic recovery. Still, investors need to look at all the facts and consider the bigger picture. Unfortunately, there won’t likely be a happy ending soon for AMC Entertainment’s loyal shareholders.
Barbie Didn’t Save AMC Stock
There’s no denying the positive points in AMC Entertainment’s third-quarter 2023 results. For what it’s worth, the company reported revenue growth and bottom-line improvement.
Aron acknowledged AMC Entertainment’s “attendance at the domestic box office in the quarter was still 16% below comparable 2019 levels.”
The CEO warned that the “short-term impacts” of the writers’ and actors’ strikes will present “challenges for AMC in 2024.” The actors’ strike has ended, but AMC Entertainment might have to deal with the financial impact for a while.
Even if we grant that AMC Entertainment had a favorable third quarter, it wasn’t enough to prevent AMC stock from dropping sharply this year. Remember, it was a $50+ stock during the “summer of Barbie.”
Clearly, the much-touted Barbie film couldn’t rescue AMC Entertainment’s shareholders from financial losses. Even if the company captures lightning in a bottle again with new blockbuster films – which is easier said than done – there’s no assurance that AMC Entertainment’s loyal investors will return to breakeven soon.
AMC Entertainment Prepares to Issue and Sell More Shares
AMC Entertainment has added to its pool of shares before. So, maybe it’s not surprising if the company does it again. Thus, AMC Entertainment has reportedly filed to offer as much as $350 million worth of the company’s stock shares.
AMC stock dropped upon the news. This undoubtedly happened because the current investors didn’t like the idea of AMC Entertainment diluting the value of the existing shares.
Among other things, AMC Entertainment intends to use the proceeds to “repay, refinance, redeem or repurchase our existing indebtedness.” Indeed, the company has a lot of “indebtedness.” According to Wedbush analyst Alicia Reese, AMC Entertainment “still has over $4 billion in debt.”
Frankly, you just never know when AMC Entertainment might announce another share offering. It’s a quick way to raise capital in the short term, but it certainly doesn’t make the current shareholders happy.
AMC Stock: The Next Act Could Be Another Leg Down
It’s fine to root for AMC Entertainment to succeed as the company strives to recover from the pandemic. Yet, there’s no guarantee that future Barbie-like blockbuster films will rescue AMC Entertainment.
AMC Entertainment has a heavy debt load and the company might announce another share sale at any given moment. Consequently, we’re assigning a “D” grade to AMC stock and don’t currently recommend it.
