Investors are not bothered by the fact that AMC is still losing money, cash is flowing, it is standing on a debt mountain, as well as strong competition, which some analysts compare it to the craze for steroids 20 years ago.
The horse is right, AMC Entertainment Holdings Inc. ended its wild week with another move that embarrassed anyone trying to explain it.
The new king of Meme shares returned in the “loss” of profit, closing 6.7% lower on Friday – $ 47.91. During the week, it is still growing by 83%, increasing by 160% in May.
It was quite a big trip for AMC. The rise of the stock channel has allowed the world’s largest cinema network to sell its equity and maintain its volatile balance. Just a few months ago on the verge of bankruptcy, the company is now a fan of retail, with this year’s 2200% profit being the highest of any share in the Russell 3000 Index. GameStop Corp., which launched the Monument Mania in January, is the second-largest with about 1,300% down payment.
“When does the balloon inflate?” I do not know, “said Eric Handler, an entertainment analyst at MKM Partners, who has a $ 1 target for AMC shares that sees no connection between the current price and what is really happening at the company. “I have no idea when they will be relevant again on a regular basis.”
Investors are not disturbed by the fact that AMC is still losing money, cash is flowing, “standing in front of a debt mountain” is like a lot of competition.
He seemed to be like the wandering madness of two decades ago, Eduard Moya, senior market analyst at Oanda Corp. “But with steroids, the swings are bigger, everything happens in a much shorter time,” he said. “The crazy thing about this trading environment is that the retailer has a better chance of fighting the big boys, now that they have low costs, they are taking systematic steps that target only a few stocks.”
On Thursday, AMC fell 18% after revealing plans to sell more shares. The company raised $ 587 million from the sale, which fell to $ 230.5 million just days after selling its equity to Mudrick Capital Management. The company later said it was seeking permission from investors to sell 25 million new shares in 2022, which is 95% less than the previous plan, which was withdrawn due to opposition from shareholders.
CEO Adam Aron told shareholders that AMC could face challenges or “exciting opportunities” in the face of the epidemic, and needed to issue “expensive shares” if that were the case. The company also rejected speculations about the split of shares.
“AMC has taken the best possible course of action, using a broken stock price to raise a lot of capital for its own purposes,” said Liberum strategist Joachim Clement in an e-mail. “Investors in Meme stocks need stock prices to be volatile and stocks to be headlines, because if attention is lost, their investments will disappear as well.”
The furious rally pushed AMC shares to unbelievable levels. The company now has a market capitalization of about $ 25 billion, which is more than 40% of the S&P 500 index. “AMC is nowhere worth the price in the market right now: it should be much lower over time,” said Michael Hughes, chief market analyst at CMC Markets. “How he gets there is someone’s guess.”
Wedbush raised its price target on Friday from $ 6.50 to $ 7.50, a level that represents an 84% drop since the last close. Analyst Alicia Reese says the firm has made the most of its recent wave of stocks by selling shares to raise cash, but called its current price “unrelated to the company’s fundamentals.” He said that the shares will see continuous “significant” instability, they do not recommend buying shares. The average target of the analyst is only $ 5.25.
AMC shares traded up $ 1.25 billion in the second quarter, bringing their cash reserves to nearly $ 2 billion, but the recovery of the movie theater network can only take place if the audience does not come into force. It still has to deal with pre-epidemic issues such as cash flow competition և crushing debt burden, which helped cause losses in the two years before the Covid-19 outbreak.
“The whole enchilada”
Another piece of cash could go to landlords who want AMC to pay back $ 470 million in rent, which he missed while his theaters were closed. Moreover, on Thursday, the company withdrew from plans to sell shares much higher in the face of fierce opposition from retailers to its army.
“It mitigates the risk of further dilution this year; it probably reassures retailers, but it also reinforces the need for strong box office recovery,” said Gita Ranganathan, a Bloomberg Intelligence analyst, in a research note.
During a May earnings conference, Aaron told analysts that streaming was not the same thing as watching a movie on the big screen or attacking the podium.
“People have been deprived of something they love, people love to go to the movies,” Aron said. “People want the whole echilada.”