Source: rblfmr / Shutterstock.com
I must give credit where it’s due. Global movie-theater chain AMC Entertainment (NYSE:AMC) is getting creative with its efforts to generate revenue. Yet, I still expect AMC stock to lose value throughout the rest of 2023.
I’m sure I’ll incur the wrath of AMC Entertainment’s loyal shareholders (a.k.a. the “Apes”). However, the truth must be told. AMC Entertainment might or might not have another hit concert film. Nevertheless, the risk-to-reward balance doesn’t favor an investment in AMC Entertainment.
Will Beyonce Save AMC Stock?
AMC Entertainment is trying hard to prevent AMC stock from sliding further than it already has. The company and its famous CEO, Adam Aron, have vigorously touted the Barbie movie. They also heavily promoted the Taylor Swift concert film.
Those events came and went, but it seems that the market isn’t buying what AMC Entertainment is selling. The AMC share price, once valued at nearly $60 this past summer, plummeted to $8 and change recently.
Still, it appears that AMC Entertainment is continuing with the same strategy. Specifically, the company and its chief executive are now relentlessly promoting a Beyonce concert movie.
Skeptical investors should wonder whether this gimmick will continue to work in AMC Entertainment’s favor. How many times can the company drink from this same well?
Besides, there’s no guarantee that the Beyonce film will be a big success. Even if it is successful, bear in mind that the Barbie and Taylor Swift films didn’t prevent a sharp downturn in AMC stock.
AMC Shares Get a Sub-$5 Price Target
Irrespective of the Beyonce concert film’s potential box office draw, there are reasons to be concerned about AMC Entertainment. For instance, Aron has admitted, “Moviegoing in 2023 still will be well below 2019 pre-COVID levels,” and cash is “very tight” for the company.
To improve AMC Entertainment’s capital position, the company enacted a 1-for-10 reverse stock split and converted some of its AMC Preferred Equity Units (NYSE:APE) into AMC common shares. Unfortunately, this had the effect of increasing the AMC common share count and, consequently, raising dilution concerns.
Speaking of raising dilution concerns, AMC Entertainment also increased the AMC share count when the company sold 40 million common shares in an at-the-market equity offering. Undoubtedly, Citigroup analysts had these events in mind when they recently reiterated their “sell” rating on AMC stock.
The Citigroup analysts also slashed their price target on AMC Entertainment shares from $15.50 to $4.75. Alluding to the issues I mentioned earlier, analyst Jason Bazinet concisely summed up Citigroup’s concerns.
“We are updating our model to reflect AMC’s 10-1 reverse stock split, the conversion AMC Preferred Equity Units (APE) to AMC common, and AMC’s recent equity raise,” Bazinet said.
Don’t Expect a Happy Ending to This Film
It appears that AMC Entertainment and its CEO are counting on Barbie, Taylor Swift and Beyonce to rescue AMC Entertainment. The company is also relying on share-dilutive measures, which current shareholders might object to.
If you’re counting on the upcoming Beyonce concert movie to save AMC Entertainment from its financial problems, don’t get your hopes up.
The last time I checked, AMC Entertainment had $9.5 billion worth of short- and long-term debt. Therefore, despite Aron’s enthusiasm for certain concert films, AMC stock is still a no-go for cautious investors.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.