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Shares of AMC Entertainment Holdings Inc. fell Thursday for toward the first loss in six days, after Wedbush analyst Alicia Reese turned bearish, as valuation concerns more than offset optimism about the movie theater industry.
The stock
AMC,
fell 0.7% in premarket trading, putting them on track to snap a five-day winning streak in which it rallied 17.3%.
In a research note to clients, with “Apes will eventually cash out” in the title, Reese downgraded the stock to underperform, after being at neutral since March 2020. She kept her price target at $7.50, which implied about 82% downside from Wednesday’s closing price of $40.79.
Reese is now the sixth analyst of the nine surveyed by FactSet who are bearish on AMC. The other three have the equivalent of hold ratings on the stock.
Wedbush’s downgrade comes less than a week before AMC reports third-quarter results, which are due out after the Nov. 8 closing bell. “We think pent-up demand in [AMC’s] markets coupled with aggressive marketing to its patrons drove moviegoers to its screens,” Reese wrote.
She is “optimistic” about the overall exhibition industry, as attendance started to “meaningfully pick up” in the third quarter as top-tier titles were released after extended delays. And the box office so far in the fourth quarter has been “very encouraging.”
But her problem with AMC’s stock is the price, and worries that at some point, fundamentals will win out over its “Meme” status.
“We downgrade shares of AMC to underperform on our assumption that ultimately the majority of retail ownership will eventually cash out and move on,” Reese wrote.
She’s just not sure when that will happen.
“Volatility in shares of AMC is likely to continue, driven by trading momentum unrelated to AMC’s fundamentals by retail investors whose time horizons remain unclear,” she wrote.
AMC is expected to report a third-quarter adjusted loss of 53 cents, after a loss of $8.41 a share in the year-ago period, which would be the least it lost since the fourth quarter of 2019, according to a FactSet survey of analysts. Revenue is expected to rise nearly sixfold to $713 million, the most since the first quarter of 2020.
Reese expects adjusted per-share losses of 48 cents and revenue of $760 million.
Separately, Reese upgraded fellow movie theater operator National CineMedia Inc.
NCMI,
to outperform from neutral. She reiterated her $5.00 stock price target, which is 42% above Wednesday’s closing price of $3.53.
AMC’s stock has skyrocketed 1,824.1% year to date through Wednesday, while National CineMedia shares have lost 5.1% and the S&P 500 index
SPX,
has advanced 24.1%.
