AMC shares up on minor loss and cinema window deal

AMC Entertainment Holdings Inc’s shares rose 5.8% on Tuesday after posting better-than-expected quarterly results and a deal with Warner Bros for an exclusive movie release period for cinemas.

Retail investors showed their enthusiasm as AMC was the top trending stock on social media site Stocktwits, with the shares trading at $35.80, regaining some ground lost in a sell-off that started in early June and putting it on track for a year-to-date gain of more than 1,700%.

While the results topped Wall Street estimates, AMC still posted a huge loss, and ticket sales were well below pre-pandemic levels at just 29% of the second-quarter 2019. Some analysts raised financial estimates but stuck with neutral ratings.

“The financials are improving, but they still have a long way to go to catch up to the lofty stock price,” said 50 Park Investments CEO Adam Sarhan.

“What happened in AMC earlier this year is not typical, and that type of a monstrous move up usually means the stock got ahead of the fundamentals, and it will take a lot of time before the fundamentals catch up.”

An AMC theatre is pictured amid the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York, U.S., January 27, 2021. REUTERS/Carlo Allegri

AMC CEO Adam Aron said on Monday the company had struck a deal with AT&T’s Warner Bros to allow a 45-day theatrical window for movies before their streaming release from 2022, instilling some hope for ticket sales.

Films including “The Batman” and “Aquaman and the Lost Kingdom” are some Warner Bros releases due in 2022.

The exclusivity window is crucial to the box office and has been at the heart of a years-long dispute between theater chains and studios, which are also seeking profits from fast-growing streaming operations.

“We are actually in dialogue, active dialogue, with every major studio,” Aron said.

The company said third-quarter U.S. ticket revenue was on track to reach 45% of third-quarter 2019 levels. In a nod to tech-savvy investors, Aron promised to accept bitcoin as payment for tickets this year.

B. Riley Securities analyst Eric Wold raised his estimate for 2021 AMC revenue to $2.46 billion from $2.42 billion and upped his 2022 estimate to $4.75 billion from about $4.68 billion.

Wold, who rates the stock neutral, said, “strong box office trends, even in the face of day-and-date streaming availability, points to the potential for a strong 2022 rebound when more exclusive theatrical windows go into effect”.

Wedbush analyst Alicia Reese raised her 2021 revenue estimate to $2.47 billion from $2.24 billion, keeping a neutral rating. In fact, most Wall Street analysts say AMC is over-valued, with the median price target on the stock at $3.70 – roughly a tenth of its current price.

Of nine analysts covering the stock, five recommend “hold,” while four have a “sell” or lower rating, according to Refinitiv.

(Reporting by Eva Mathews, Medha Singh in Bengaluru, Sinéad Carew in New York; Editing by Saumyadeb Chakrabarty)