Will global movie-theater chain AMC Entertainment (NYSE:AMC) get a revenue bump from a few box-office winners? Yes, but this doesn’t mean AMC stock will stage a miraculous recovery in the fourth quarter. For the time being, it’s wise for prospective AMC Entertainment investors to sit on the sidelines and enjoy a movie or two.
I’ll admit, AMC Entertainment CEO Adam Aron is great at getting shareholders hyped up. He also knows how to promote movies and use social media to his company’s advantage.
Yet, AMC Entertainment’s loyal investors (known as “apes”) need to be careful now. At the end of the day, it takes more than a CEO hype man and a handful of blockbuster films to deliver enduring shareholder value.
AMC Stock Got a Price Target Raise, But Read the Fine Print
The “apes” might celebrate Roth MKM analyst Eric Handler’s recent price target hike of AMC stock, from 50 cents to $5. Don’t get too excited, though, as this isn’t as bullish as it might seem.
Handler’s price target increase factors in AMC Entertainment’s 1-for-10 reverse share split. Also, bear in mind that the AMC Entertainment share price has been close to $9 for a while. So, a $5 price target isn’t super optimistic.
On the other hand, Handler acknowledged AMC Entertainment’s success with blockbuster films like Barbie, Oppenheimer and the Beyoncé and Taylor Swift concert movies. “Higher-than-projected box-office results are causing us to raise our 3Q estimates,” the Roth MKM analyst wrote.
AMC Entertainment Share Dilution Remains a Concern
There’s no denying that some films, and especially the Taylor Swift concert movie, will provide significant revenue to AMC Entertainment. Impressively, the Taylor Swift film brought in $95 million to $97 million during its opening weekend.
Yet, the market knows this but hasn’t given AMC stock the massive moonshot that the “apes” had probably hoped for. Certainly, the market knows that AMC Entertainment has a long way to go before the company can fully service its billions of dollars worth of short- and long-term debt.
Even Handler, who had some positive things to say about AMC Entertainment, seems concerned about the company’s financial situation. The Roth MKM analyst noted AMC Entertainment’s cash burn and warned, “We assume further share issuances will be coming to maintain a comfortable liquidity level.”
AMC Entertainment has issued and sold new shares before. It’s not hard to believe that the company will do it again. This raises share dilution concerns, so Handler’s point is duly noted.
AMC Stock: Grab Your Popcorn and Just Watch
I’m not hoping that AMC Entertainment will fail, and I don’t believe Handler is, either. Rather, it’s just our duty to convey our concerns, including AMC Entertainment’s cash burn and likely future share issuances.
Thus, I’ll acknowledge AMC Entertainment’s blockbuster films but still can’t recommend buying AMC stock in 2023’s fourth quarter. For now, it’s prudent to just enjoy the show and root for the “apes” from afar.
On the date of publication, David Moadel did not have (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.
