By Senad Karaahmetovic
An MKM Partners analyst cut the price target on AMC Entertainment (NYSE:AMC) stock to $0.50, from the prior $1.50, to reflect a lower Q3 box office outlook for the entire sector.
The Sell-rating is reiterated as the analyst sees over 90% downside risk compared to the current market price.
“We continue to rate AMC as a Sell, a view driven by what we perceive as an upside-down capital structure resulting from a substantially larger number of shares outstanding since the start of the pandemic,” the analyst wrote in a client note.
Moreover, the lower price target also reflects the recent stock dividend of one preferred APE share issued for each AMC share.
“As a result of a 400% increase in AMC’s shares outstanding (now in excess of 1bn) since the start of the pandemic along with its sizable $5.5bn debt load, it will likely take a number of years for the company to grow into its capital structure.”
The analyst also argued that the movie theater chain business “has hit a wall in August, and trends should remain lackluster until the back half of October.”
“We are lowering our box office industry forecasts (and company-specific projections) for 3Q and 4Q and we have questions about the growth trajectory for 2023,” he added.
AMC stock is down 1.8% today.