The Zhitong Finance App learned that B. Riley analyst Eric Wold published a report saying that AMC Cinema Line (AMC.US) currently has abundant cash flow and is expected that industry recovery will drive the company's revenue growth. Reiterating the company's “buy” rating, the target price is 16 US dollars.
According to information, in January of this year, AMC's stock was able to survive under the pandemic crisis, driven by retail investors in the Twitter Reddit section. However, due to rising stock prices, AMC seized the opportunity and announced on Thursday that it had successfully completed its 43 million on-market (ATM) stock issuance plan. As a result, AMC has now raised $428 million to support its balance sheet.
Wold believes AMC may already have sufficient cash and will no longer need financing “until the industry recovers in 2022/2023,” even though the company still has room to choose to “take strategic action to further improve its balance sheet.”
The analyst said, “At the current level of movie attendance, AMC 'has at least a year left in the cash flow period' (this may be longer as attendance rates are still increasing).”
Additionally, Wold viewed AMC's fund-raising decision as “speculative” rather than “strictly necessary,” and stated that the company had taken other steps to strengthen its balance sheet, including renegotiating its property lease terms to take into account the decline in cinema occupancy rates during the pandemic. Meanwhile, the analyst believes that AMC's cash flow prospects “have improved” this year and expects “the box office to recover by the end of the year,” which will generate more revenue to cover the company's expenses.
Wold said the two largest markets, New York and California, have more or less lifted restrictions on cinema occupancy rates. And the lifting of this restriction coincides with the “suppressed demand for movie viewing” over the past year. Wold said the blockbusters released this summer were “impressive,” and said the release dates for these films “began to stabilize in recent weeks,” which should make it easier for the market to anticipate AMC's box office revenue this year.
According to these data, Wold estimates that the US box office will drop 70% in the second quarter of 2021 (compared to 2019 levels), but the decline is expected to narrow to 35% by the third quarter and 20% in the fourth quarter. The analyst said that under this environment, this year's revenue is expected to be close to 2.5 billion US dollars, nearly double to 4.7 billion US dollars in 2022, and increase about 15% to 5.4 billion US dollars in 2023. At that time, it is expected that AMC should almost resume profit, losing only $0.35 per share in FY2023.
However, Wall Street had the opposite view. Overall, the market's consensus rating for the stock is “hold”. Among them, 1 analyst gave it a “buy” rating, 3 gave it a “hold” rating, and 2 gave it a “sell” rating. The average target price is 7.13 US dollars, which means that the company's stock price has about 49% room to decline in the future.