AMC Leisure Holdings Inc. inventory has “decoupled” from fundamentals and must be bought, in keeping with MKM Companions analyst Eric Handler, who stated the inventory may fall to $1 this yr.
rose $1.03, or 7.8%, in morning buying and selling Monday, however pared earlier intraday good points of as a lot as 30.1%, whereas buying and selling quantity ballooned to 245.6 million shares.
Though the inventory additionally soared $4.63, or 53.7%, on Friday, it has now recovered just 50% of the $11.27, or 56.6% plunge it suffered final Thursday after the Robinhood trading platform restricted trading in some shares.
Handler minimize his ranking on AMC to promote, after being at impartial since Might 2020. He additionally halved his 12-month inventory worth goal, to $1 from $2, saying that whereas liquidity isn’t a difficulty for 2021, “attaining solvency got here at a steep worth.”
He believes the latest worth spike and volatility within the inventory, with somewhat assist from the Reddit/WallStreetBets crowd, “has decoupled AMC’s share worth and its valuation.”
Handler acknowledged that the near-term prospects of chapter have been averted, because the struggling movie show chain has raised $1.2 billion in contemporary capital over the previous couple months.
“Nevertheless, fairness shareholders have been diluted by roughly 75% during the last couple months and there’s nonetheless roughly $5.7 billion of debt, a complete which is rising every quarter because of deferred curiosity funds that are tacked on to the principal steadiness,” Handler wrote in a observe to shoppers. “There’s additionally the overhang of $450 million of deferred rents which can some day should be addressed.”
Handler estimates that AMC presently has roughly 440 million shares excellent, based mostly on latest firm filings and bulletins of at-the-market (ATM) inventory choices and debt exchanges. That compares with the whole 137.4 million Class A and Class B shares the corporate had on the finish of October.
“It will not be stunning to see AMC discover the potential for one other ATM providing on account of the corporate’s elevated inventory worth,” Handler wrote. “Further exchanges of debt for fairness is probably going one other path administration will discover.”
The inventory has skyrocketed 505.7% simply this yr, whereas the S&P 500 index
has slipped 0.1%.
Individually, Handler downgraded fellow cinema chain Cinemark Holdings Inc.
to impartial from purchase, saying he sees restricted near-term upside with the inventory principally again pre-pandemic ranges. Regardless of the downgrade, he raised his inventory honest worth estimate to $22 from $15.
In the meantime, Handler reiterated his purchase ranking on IMAX Corp.
and lifted his inventory worth goal to $25 from $18. He says IMAX’s enterprise mannequin “makes a giant distinction,” because the “international footprint and asset-light construction” has helped it navigate by the COVID-19 pandemic.