Meme stock extraordinaire AMC Entertainment Holdings, Inc. (NYSE:AMC) has long reaped the gains and the troubles from its meme hype. However, the hype has cooled down.
This year, AMC’s share price has declined by more than 24%, while over the past year, it has fallen by about 38%. Although beaten down, the stock is not exactly cheap as evidenced by a 69x forward cash flow multiple that sits well above the current industry average.
We look into AMC Entertainment to see whether the stock is past its hype, or is there something investors can look forward to?
AMC Entertainment Rising Like a Phoenix?
The movie theatre operator was not doing well before the 2021 meme stock frenzy. It was on the verge of bankruptcy and narrowly avoided that fate. A flurry of retail investors, sitting on the pandemic stimulus checks and time, started investing in AMC’s shares in a frenzy. This led to the stock reaching an all-time high and the company shoring up some much-needed capital.
The excitement was not long-lasting, and the share price tumbled from highs. Despite that, Eric Wold, senior analyst at B. Riley Securities, said that of all the meme names, AMC was able to take advantage of the hype and “recognize the opportunity.” For example, it built a $2 billion “war chest” that could be used to invest in upgrading its theaters and new cinema leases.
AMC seems to have turned its attention towards growth by leveraging the popularity of new releases. The popularity of “Barbie” and “Oppenheimer” was a boon for business and the P&L in particular.
Management is also increasing screens to meet demand. AMC is set to add 40 Dolby Cinema theaters to its U.S.-based AMC locations through the end of 2027, representing a 25% increase in the number of branded premium screens, bringing the company’s total to over 200.
The company also partnered with CJ 4DPLEX to add 65 Screen X auditoriums and 40 4DX theaters worldwide.
AMC has realized the potential of larger-than-life cinema-viewing, which usually comes with a higher ticket price. That’s why its focus has turned towards premium large format screens, more commonly called PLFs. These screens accounted for 9.1% of the domestic box office, around $600 million last year.
How Are AMC’s Financials Holding Up?
AMC last reported its first quarter results for fiscal 2025 when revenue slid by 9% from the prior year’s period to $862.5 million. This was due to a 10% decline in attendance and dominoed into an 11% drop in admission revenue to $473.5 million. A contributing factor was the marginal decrease in ticket prices.
The company ended last year on a high as Disney’s animated musical “Moana 2” was instrumental in box-office gains. Other names like “Wicked” and “Gladiator II” also helped in delivering the biggest Thanksgiving weekend in U.S. and Canadian box office history.
The leadership team continues to post wide losses nonetheless. They reported an operating loss of $145.9 million during the quarter, which was 35% higher than the prior year’s period.
Just like the top line, the bottom-line financials were impacted by the drop in attendance numbers. There was also a factor of unfavorable comparison. The quarterly net loss widened by 24% year-over-year to $202.1 million.
On an adjusted basis, its net loss climbed just over 45% year-over-year to $250 million. Adjusted EBITDA dropped by 37% to a loss of $58 million. On an adjusted basis, net loss per share improved from $0.78 in the year-ago quarter to $0.58.
Unsurprisingly, the balance sheet is burning cash and free cash flow stands at an outflow of $417 million for the quarter.
What Should You Do with AMC Entertainment Now?
The meme hype has largely exited AMC Entertainment for now, which means the fundamentals have come to the fore once again. Now that attendance is falling and impacting the company’s growth and profitability, worries are growing justifiable that the fortress balance sheet has cracks in it.
The good news is AMC has hedged its bets on new releases of popular films, which are set to grace the screen this year and beyond.
But analysts are not optimistic about AMC’s future prospects. Of the seven analysts rating it, not one gave a “Buy” rating. The consensus price target of $2.92 indicates a modest potential downside so the stock might be best observed from afar for now.
What Is The Long-term Outlook for AMC Stock?
The long-term prospects for AMC look worrisome with analysts consensus price sitting below the current share price. It also has a significant debt burden, is burning through cash quickly and hasn’t been profitable over the past 12 months. Plus, the last decade has been rough on shareholders and there’s little sign that a turnaround lies on the horizon.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.