Photo by Donreál Lunkin on Unsplash
AMC Entertainment (NYSE: AMC) stock price continued its strong sell-off this month as concerns about the company remained. This month, it has dropped by over 23%, bringing the year-to-date losses to almost 50%. That makes it one of the worst-performing companies on Wall Street.
Slow growth and high debt load
AMC Entertainment is facing major headwinds, causing many investors to believe it will need to restructure in the next few years. The biggest headwind is that the company’s business is not doing well as theatre attendance remains below the pre-pandemic levels. One reason for this is last year’s Writers Guild and Screen Actors Guild strikes. This performance is significantly different from what is happening in the cruise industry which shut down during the pandemic. The sector has staged a strong recovery, with firms like Royal Caribbean seeing strong bookings.AMC’s slow growth comes at a time when the company is spending substantial sums of money in interest payments. It paid over $373 million in interest in 2023, a substantial figure considering that its total revenue stood at $4.36 billion.AMC sits on a mountain of debt. Total long-term debt stands at over $4.5 billion while its lease obligations are over $4 billion. On the positive side, the company has proactively reduced its debt load in the past few years. In 2020, it ended the year with over $10 billion in debt and lease obligations.Reducing this debt load has cost investors dearly as it has mostly raised money by selling shares. The company used its equity to raise over $860 million in 2023 and has already raised $250 million this year. There is a possibility that the company will raise additional funds later this year. Consider the following statement in its last 10k report:
“In the absence of significant increases in operating revenues and attendance from current levels, or obtaining significant additional sources of liquidity, an investment in our Common Stock is highly speculative; holders of our Common Stock could suffer a total loss of their investment.”
AMC’s biggest challenge will not happen in 2024 and 2025 since its maturities are manageable. Instead, it faces maturities worth almost $2.9 billion in 2026. Raising those funds will be significantly difficult. Still, there is a reason to be optimistic. The company is boosting its efficiency by cutting costs. Also, analysts are optimistic that its revenue growth will resume growing in 2025.AMC Entertainment had revenues of over $4.82 billion in 2023 and the estimate is that it will generate $4.5 this year followed by $5.1 billion in 2025. The dip this year is understandable since the company benefited from Barbie and Oppenheimer in 2023.AMC’s business could benefit from the releases scheduled for later this year. There are about 15 franchise films set for between June and December, including Moana, Bad Boys, and Sonic the Hedgehog. These movies will be followed by major releases like Fantastic Four and Superman in 2025. At the same time, the company could benefit from this year’s Summer Olympics, which will be broadcasted in some of its chains
AMC stock price forecast
AMC chart by TradingView
AMC itself has noted that its stock is highly speculative since there is a possibility that it will need some restructuring that will wipe out existing shareholders. That view matches my recent writing that it is a high-risk and high-reward investment.Turning to the daily volume candles chart, we see that the stock has constantly remained below the 50-day and 25-day Exponential Moving Averages (EMA). But there is a ray of hope as the stock has formed a falling wedge pattern, which is nearing its confluence level. That means that it could have a big rebound when it publishes its financial results on May 9th. This is in line with what I wrote about AMC Entertainment here.More By This Author:AUD/USD Forex Signal: More Upside Ahead Of US PCE Data
BTC/USD Forex Signal: Bitcoin Has Upside Amid a Risk-On Sentiment
GBP/USD Forex Signal: Pound Sterling’s Comeback Set To Be Brief
