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Is AMC a buy after a wild run?

It’s time to dig into a popular entertainment company. Here is the break down of $AMC, otherwise known as AMC Entertainment.

Current Price: $56.19

52/Wk High: $72.62

52/Wk Low: $1.91

Market Cap: $27.6 Billion

Read below for the break down!

AMC Entertainment ($AMC) is a popular company that owns and operates theatres around the world. Infact, AMC operates over 1,000 theatres across 13 countries and 44 states, making it a common name within the entertainment world.

Due to the COVID-19 pandemic, AMC was nearly driven to the end, with mass closers, limited gatherings, and minimal production the company was on the brink of bankruptcy.

Impressively, AMC defeated the odds, leading a cohort of negotiations with investors to gain a $917 million cash infusion in January.

Unfortunately, the continued cash infusions have mostly been the result of major stock offerings, diluting current shareholders. As of June second, the company has 501,780,240 shares outstanding, over ten fold more than the just 50 million outstanding shares in June of 2020.

Making these successful offerings possible is not AMC management themselves, but supposedly the “reddit rebellion” and “meme stock” mob who worked to create a broad squeeze and rally in the stock throughout recent weeks and months, driving the stock price up a whopping 2494% in just the first six months of the year.

While the offerings have gone smoothly, insiders have lacked conviction with over seven insiders dumping significant portions of their AMC stock holdings. Infact, insiders alone have sold over 285,100 shares throughout Q2.

Digging into the numbers, AMC Entertainment missed Q1 2021 expectations with an EPS of $-1.42, significantly lower than the analyst’s EPS consensus estimate of $-1.30. On a year-over-year basis, EPS improved by 93.20%.

On the revenues front, AMC reported total Q1 revenues of $148.3 million, representing a sizable 84.2% decline in revenues on a year-over-year basis. For reference, total Q1 2020 revenue were $941.5 million.

AMC continued to run a net loss as well, with the first quarter net loss totaling $567.2 million. While the loss was significant, it was better than the Q1 2020 net loss of $2.1763 billion.

Unfortunately, cash used in operating activities continued to drag on the company with net cash used in operating activities totaling $312.9 million compared to the Q1 2020 level of $184.0 million.

Shifting into EBITDA, adjusted EBITDA totaled $-294.7 million in Q1, representing a significant decline over the same time 2020 level of $3.1 million.

Cash flows continued to worsen as well in the first quarter, with free cash flow totaling $-324.8 million. For comparison, the Q1 2020 free cash flow level was $-275.7 million.

On the attendance front, AMC experienced a significant decline. In Q1, AMC reported total attendance of 6.797 million compared to the same time 2020 level of 60.495 million.

Breaking down attendance, US markets attendance was down 84.3% and international attendance was down 97.3%.

On the bright side, as of March 31st AMC was operating 585 domestic theatres but with limited capacities.

Shifting into the balance sheet the numbers are weak.

Total Debt: $5.550 Billion

Total Liabilities: $12.798 Billion

Total Assets: $10.489 Billion

Cash & Short Term Inv: $813 Million

On a valuation basis, AMC does trade at a premium with a price to sales ratio of 53.4x and price to cash per share ratio of 36.30x.

Unfortunately, leadership has failed to be entirely effective of late.

Return on Assets: -27.43%

Return on Invested Capital: -32.21%

Given the numbers the analyst’s are bearish on AMC with a mean price target of $4.30/share, representing a -92.18% downside.

The high price target is $7.50/share, representing a -86.36% loss, while the low price target is $1.00/share, representing a -98.18% downside.

The big money is less involved with just 22.57% of AMC Entertainment being owned by institutions. Top holders include BlackRock Institutional Trust, The Vanguard Group, and Invesco Capital Management.

On a technical basis, AMC has gone parabolic. According to the six-month charts the MACD is moving with strong upside momentum within a range of 10.58 down to 6.31.

The six-month charts are also indicating an RSI of 76.44 and CCI of 151.22, both of which are on the high end.

Looking to the future, it's tough to see much of one for AMC. The company is not only facing a difficult recovery, but a declining interest in theatre going to and premiers due to the digital streaming revolution.

In short, AMC Entertainment ($AMC) offers a weak financial and fundamental situation, limited demand, a dying customer base, inefficient management team, overshot technicals, and bleak competition due to digital streaming.


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.

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