AMC Entertainment Holdings Inc. stocks rose Monday after B. Riley analyst Eric Wold said it was time to buy, citing an improving balance sheet outlook and a strong opening weekend for Godzilla vs. Kong indicated a revival in demand.
Wold raised his rating to buy from neutral and raised his target price to $ 13 from $ 7, 39% above Thursday’s closing price.
“We are impressed with the management’s ability to weather the pandemic headwinds by both strengthening the balance sheet and negotiating with landlords to improve the cash runway through 2022,” Wold wrote in a statement to clients. “And as the largest exhibitor in North America that also operates most of the IMAX screens, we see AMC as well-positioned to benefit from the predicted recovery in the industry and to match pre-pandemic visitor numbers by 2023.”
The upgrade comes after an “impressive” opening box office over the weekend for Warner Bros.’s “Godzilla vs. Kong”. Warner Bros. is owned by AT&T Inc.’s
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Wold said that while the North American theater base is only about 60% open and seating restrictions averaged between 25% and 50%, the film still generated about $ 48.5 million in box office revenues. This is comparable to the $ 47.8 million that “Godzilla: King of the Monsters” opened in May 2019.
“We believe consumers want to leave the house and return to the theater, and these results are very telling, especially considering the film was available for free to HBO Max subscribers at the same time it opened in theaters,” Wold wrote.
AMC investors have been on a roller coaster ride for the past several months as the stock has been embroiled in the trading frenzy of sharply shortened stocks, which include shares in GameStop Corp. belonged.
The sell-off over the past two weeks followed a five-week earnings streak that saw the stock jump 149.2%. That winning streak came after the stock lost more than half its value (57.8%) in two weeks, after rising 525.5% in January.
The stock recently changed hands 46.1% below its more than two-year closing high of $ 19.90 on Jan. 27, but is still up 406.2% year-to-date during the S&P 500 index
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gained 8.6% in the same period.
B. Rileys Wold said his only concern about AMC, and the reason for the previous neutral rating, was that the company’s high level of debt could weigh on future cash flows.
“However, with management increasingly signaling the ability and willingness to use equity to reduce debt burdens, we can now make the upside opportunity for stocks more constructive,” Wold wrote.