Can AMC Entertainment’s share price shoot higher after Q3 earnings?

AMC Entertainment [AMC] is expected to inch closer to profitability against over a fivefold increase in revenue year on year when it reports its September-quarter figures on 8 November.

The improved performance is because the chain has been able to re-open the almost 600 cinema theatres in the US and more than 300 around the world following closure and reduced attendances in the pandemic lockdowns.

The AMC Entertainment share price has ranged between $2 and $12 between March 2020 and May this year as lockdowns kept people at home, watching films on streaming services such as Netflix [NFLX].

However, as lockdowns were lifted so was the AMC share price. It has also benefited from being a so-called ‘meme stock’ bolstered by groups of retail investors on social media.

 

Pandemic woes could continue

Nonetheless, “AMC’s journey through this pandemic is not finished, and we are not yet out of the woods,” CEO Adam Aron has said.

Once again, fears over the Delta Covid-19 variant persist and movie studios are threatened by producers sending new films straight to home screens over streaming channels.

AMC brought out new plans, such as selling its AMC Theatres Perfectly Popcorn in shopping mall retail stores, counters and kiosks, and direct to people’s homes from next year as a measure to counter the threat. It hopes to grab a piece of the multi-billion-dollar popcorn market and, if consumers are staying at home to watch movies more, then at least capture some of their spend.

“AMC’s journey through this pandemic is not finished, and we are not yet out of the woods” - CEO Adam Aron

 

Over the last 12 months, the AMC share price has rocketed by 1,645% compared with peers Cineplex [CGX.TO], which has seen a 162% rise and Cinemark [CNK] with 139%.

Can AMC’s share price retain its star power after Q3 earnings?

 

Back to the box office

Analysts at Zacks expect AMC Entertainments to post a loss of -$0.42 per share, which is an improvement of 92.63% on the same period last year and revenues of $768.63m, up 543.21%.

Wall Street analysts estimate that it will hit $1bn revenue in the fourth quarter.

According to City Index, AMC has been helped by the screening, after much delay, of the new James Bond film – No Time to Die – and other strong titles such as Marvel’s Black Widow “despite Disney’s dual-approach with its streaming platform”.

AMC has revealed already that its ticket sales and food and drink sales reached their highest level since the pandemic started in October. Overall, US box office sales rose 62% year on year in the third quarter, but remain at half the level they reached pre-pandemic.

Will cinemagoers have the confidence to return to packed theatres in the months ahead, even if the pandemic continues to fade?

  

Analysts are cautious not just because of the uncertain consumer environment but also AMC’s pumped-up valuation of $20bn courtesy of its meme stock push.

According to Market Screener, the mean consensus is a Sell with a target price of just $5.44. Wedbush analyst Michael Pachter recently reduced his rating from Neutral to Underperform. He is one of those uneasy about the valuation, stating that “the ultimate majority of retail ownership will eventually cash out and move on”.

However, he is confident about cinema demand, and describes industry fourth-quarter box office sales as encouraging.

 

Light at the end of the tunnel

In the second quarter, AMC posted earnings per share of -$0.71 compared with analysts’ expectations of a loss of -$0.91. Its revenues came in at $444.7m, compared with forecasts of $382.1m.

It said 22 million people visited its cinemas, up on the 7 million in the first quarter but down on 97 million in the pre-pandemic second quarter of 2019.

AMC CEO Aron said: “We are not taking a victory lap ... We are still losing money; we are still burning cash. But we can see a light at the end of the tunnel.”

“We are not taking a victory lap ... We are still losing money; we are still burning cash. But we can see a light at the end of the tunnel” - Adam Aron

 

Looking for growth

Analysts will pore over box office figures and cashflow to see if the recovery is continuing to take hold at AMC.

There will also be a lot of focus on the threat of so-called hybrid movie releases that are shown not just in the cinema but also at home via streaming services.

Finally, analysts will be keen to discuss AMC’s diversification plans such as its popcorn ambitions, and showing sports and pre-taped concerts, as well as accepting Bitcoin to pay for tickets.

Take your seats for the next showing of the AMC share price.