AMC Entertainment Unreels 13.4% Advance Thanks to New Analyst Affection

AMC Entertainment Unreels 13.4% Advance Thanks to New Analyst Affection

AMC Entertainment (NYSE:AMC) has suffered from the same malady that's hit a lot of entertainment venues over the last year: lockdown fever. AMC, however, has taken things especially hard—as have other competing theaters—thanks to the slow resupply pace of movies from the studios. A new report, however, provides a little extra push for AMC thanks to an upgrade from one analyst.

B. Riley Steps Things Up at AMC

B. Riley is the name that pays here, as the analyst not only ramped up its assessment of AMC Entertainment, but put its money where its mouth was and upgraded the price target as well. Substantially, as a matter of fact; not only did B. Riley—via analyst Eric Wold—upgrade AMC from “neutral” to “buy”, but it also nearly doubled the price target from $7 a share to its new level of $13 per share.

Wold reportedly took his cues from the recent performance of “Godzilla Vs. Kong,” which brought in $48.5 million for its first five days. The fact that a holiday weekend interjected itself in there likely didn't hurt things for the film's release, but given that the United States theater base is about 60% open, at last report, that suggests there is still plenty of room for people to get to the theater and watch their favorite movies on opening day. Wold also noted that AMC has done well in terms of building its balance sheet, and engaging in active negotiation with landlords to reduce the impact of paying rent on empty buildings. AMC is also taking advantage of recent run-ups in price to offer more shares and pay down its debt load.

Here's the part that's especially interesting; “Godzilla Vs. Kong” was also released to HBO Max for no extra charge the same day it hit theaters. That's the exact same tactic that Disney (NYSE:DIS) used with “Raya and the Last Dragon,” you'll remember, and all Raya could muster was a hair over $8 million for its opening weekend about a month ago.

Broader Analysts Are Less Convinced

While B. Riley's assessment comes at an excellent time for AMC, which is likely desperately hoping summer brings a turn-around with it, it's not exactly representative of the broader analyst pool, as based on our latest research.

AMC has been rated a “hold” for the last two years now, though the ratios comprising that hold have shifted in that time. A year ago, back when the pandemic was really just getting started, the company had three “buy” ratings to its credit, along with six “hold” and five “sell”. Six months ago, meanwhile, the company slipped to two “buy” ratings with its six “hold” and five “sell”. Three months ago, it was down to one “buy”, five “hold” and four “sell”, which brings us to today, with one “buy”, four “hold” and five “sell.”

B. Riley currently holds the Street-high price target from our analyst pool, with $13. With the low target currently down around $1, though, and the average at $4.63—the stock currently sells at $10.34 as of this writing—it's clear there's downside potential afoot, as well as quite a bit of un-updated targets. So far this year, the analysts have weighed in just four times: B. Riley, of course, but also UBS Group who started coverage at “sell”, MKM Partners who downgraded to “sell”, and Wedbush, who kept a neutral rating but doubled its price target to $5.

A Little Slice of Normalcy

Much has been made of the “recovery narrative” in recent weeks, especially as some states manage to make it back to “business as usual” while others are more hesitant, yet still making some progress. The basic concept is that people in general are tired of pandemic living, and want to see life return to what it looked like in 2019.

Certainly, AMC has plenty of competition from other theaters like Cinemark (NYSE:CNK), as well as streaming services like Netflix (NASDAQ:NFLX) and Disney+. Those competitors will weigh on AMC's bottom line, like they always do. AMC has shown, however, that it's willing and able to think outside the box and take advantage of current conditions. While Cinemark banned “Raya and the Last Dragon” from appearing within its walls, AMC seemed to have little problem going after whatever fruit HBO Max left behind.

There's a place for the theater still left in our collective desire for entertainment. Sure, streaming has proven remarkably convenient, but it still requires you to stay home and watch. Getting out and seeing a movie has long been a part of the American experience, and likely will be to come. The pandemic has hit that notion hard, but as Godzilla just demonstrated, there's still plenty of interest in going back to the theater.

Companies in This Article:

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
AMC Entertainment (AMC)$9.33-5.8%N/A-0.27Hold$4.33
The Walt Disney (DIS)$187.26+0.7%N/A-117.77Buy$189.46
Cinemark (CNK)$21.26-2.3%N/A-7.11Buy$21.00