Movie theater chain leader AMC Entertainment (NYSE:AMC) posted an 11% surge in premarket trading, and has held onto those gains going into this morning's trading session as of this writing. The biggest reason behind the gains is connected to a recent new stock buy, along with some highly positive developments from Memorial Day weekend. While optimism has been slipping for months from the larger financial analyst community, there are at least some signs of life returning to the movie theater concept in general, and AMC Entertainment in particular.
AMC's Big New Buyer
Perhaps the biggest cause of new support behind the surge at AMC was the revelation that Mudrick Capital Management was buying in. The investment firm put around $230.5 million in support behind AMC, picking up 8.5 million shares of the company in the process. Mudrick's move follows recent improvements in AMC stock seen from Reddit-led investment movements and hope for the future. Those wondering “Will AMC stock rebound?” have that much more reason to believe it will.
AMC, at last report, plans to put that new burst of funding back into its operations, including theater assets and leases. Reports also suggest that the company is also considering debt reduction, and planning to make some upgrades as well. The notion of upgrading movie theaters has long been a part of the overall landscape, with theaters adding everything from upscale dining and seating to day care to their operations in a bid to draw attention.
AMC currently has around $5 billion in debt outstanding, along with deferred lease payments of $450 million as theaters spent most of 2020 closed. Yet, as Adam Aron—AMC's president and CEO—noted, the company raised that $230.5 million by issuing just under 1.7% of its current issued share capital.
While consumers seemed hesitant to make their way back to theaters—and studios seemed hesitant to release their stockpile of completed films—Memorial Day weekend proved to be a high point for movie theaters. Specifically, the release of “A Quiet Place Part II” brought in $48.4 million over the Friday-Sunday period, the highest any release has seen since Covid-19 first emerged.
With Memorial Day figures added in, North American theaters brought in almost $100 million in ticket sales, and “A Quiet Place Part II” accounted for $57 million of that by itself. With several major titles set to release this summer—including the latest installments of “The Purge,” “The Conjuring,” and “Fast and the Furious”—there's more fodder for a full potential resurgence afoot. Competing chain Cinemark (NYSE:CNK) actually posted 1.8% gain in premarket trading that also held into this morning's session thanks to Memorial Day weekend figures.
How Do Financial Analysts Feel About AMC Stock?
While Americans do seem to be making their way back to theaters in large numbers, the broader financial analyst community—as detailed by our latest research—is much less sure of a comeback. AMC is currently rated a consensus “hold” by our latest figures, and that rating has remained steady for the last two years. Additionally, there has been no buying interest seen since September of last year, leaving the AMC stock forecast somewhat downbeat.
A year ago, AMC had two “buy” ratings, seven “hold” and five “sell” to its credit. Six months ago, however, the buyers left altogether, leaving us with six “hold” and five “sell” ratings. Now, we're currently at five “hold” and five “sell.”
Price targets, meanwhile, are in a very narrow range. The current average target of $4.56 per share is supported by a high of $16 and a low of $1. With shares currently selling at $30.17 as of this writing, there's clearly quite a bit of downside potential involved.
Recent developments—in spite of the gains seen in AMC stock after hours—have not been kind. Last Wednesday, B. Riley downgraded the stock from “buy” to “neutral”, yet left its $16 price target intact. Before that, Loop Capital back in early April reiterated its “sell” rating on the company with the analyst low price target of $1 per share.
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