AMC Entertainment Loses Ground but Looks for a Rebound

If any stock has taken a beating in 2020, and beyond, it's AMC Entertainment (NYSE:AMC). The pandemic shutdowns, the loss of first-run movies, the collapsing theatrical window and ongoing customer skittishness are all coming together to deal a knockdown blow to this great American brand. However, the latest reports out suggest that recovery may be afoot, and it's already starting to turn things around a bit.

Not a Complete Loss

For those who were going into trading expecting AMC to post a complete loss, the good news is you will be disappointed. Not by much, unfortunately, but enough to spark some hope in the company's recovery going forward.

The company reported a disaster in earnings, turning in a loss of $3.15 per share. Thankfully, though, this was slightly narrower than the expected loss, which was $3.16 per share. It's a disaster compared to the same time the previous year, though, when the company posted a loss of just $0.35 per share.

Revenue also took a hit, coming in at $162.5 million. This, however, was also better than expected as Refinitiv analysts were looking for revenue of $142.4 million.

The full-year numbers are nothing short of a catastrophe. AMC posted a total loss of $4.6 billion for 2020, with revenues coming in at just $1.2 billion against 2019's figure of $5.5 billion.

Analysts Waiting for a Comeback

Additional good news has emerged from the analyst quarter, who isn't advising investors cut and run yet. Sentiment for the company, however, has been increasingly bearish for the last six months, based on our latest research.

The company has been a consensus-rated “hold” for the last six months. Six months ago, the company had four “sell” ratings, eight “hold” and one “buy” to its credit. Three months ago, the buyer departed, leaving us with four “sell” and seven “hold”. That slipped to four “sell” and six “hold” a month ago, until we hit today, where there are now five “sell” ratings and six “hold.”

The price target, meanwhile, has been dropping like a rock off a cliff the whole time. Six months ago, it sat at $6.50 before dropping to $5.41 three months ago. A month ago, it dropped again to $5.35, before rolling off the cliff altogether today, to reach a price target of $3.69 per share. In fact, just yesterday, UBS Group started coverage on AMC, advising its customers to sell. This is especially odd given that, a day prior, Wedbush doubled its price target from $2.50 to $5 per share.

A Tailor-Made Third Act Recovery Play

AMC in recent days has enjoyed the support of the retail investor, who has made it, along with others like GameStop (NYSE:GME), the subject of surprising increases despite issues in the fundamentals. Don't make the mistake, however, of thinking that there's no substance behind the style; there is still quite a bit to like about AMC.

Yes, there will be ongoing problems for the company. People will still be skittish for quite some time about making a return to the theater, thanks to months upon months of breathless panic coverage about the coronavirus. The return of new releases should help, but with studios seemingly less interested in cutting in the theaters, the end result may be a little shaky. For a handy case in point, look at Disney (NYSE:DIS): its recent release of “Raya and the Last Dragon” brought in a thoroughly anemic $8.6 million in its opening weekend. By way of comparison, “Sonic the Hedgehog”—one of the last pre-pandemic releases—brought in $58 million on a three-day weekend in February. It's unclear, however, how many people dropped the extra $30 for Premier Access to the film on Disney+. Having that number would really tip the scales one direction or another.

This clearly low number may well allow AMC to make a case to studios. With theaters like Cinemark (NYSE:CNK) refusing to show “Raya” thanks to Disney's plan to release it simultaneously on Disney+,  this may put a bit of a fright into studios planning similar streaming strategies. Additionally, with theaters reopening all over the country to some level or another—even Los Angeles is finally being allowed to reopen theaters—this is going to make them increasingly viable platforms for releases once more.

This combination of factors—reopening theaters along with things to actually show therein—should serve as an attracting factor to theater-goers once more. The recovery will certainly be gradual, but those who put faith, and investment, in AMC et al should be pleasantly surprised going forward.