Wedbush, an analyst firm, says that AMC Entertainment Holdings Inc. will gain from better summer box office.
On July 24, the movie theater chain and original meme stock gave guidance for the second quarter. AMC AMC 0.68% said that the strikes by Hollywood actors and writers had caused lingering weakness.
Wedbush analyst Alicia Reese wrote in a note released Thursday that the North American box office ended down 27% year over year due to a tough comparison and the fact that fewer movies came out this year because of last year’s Hollywood labor strikes. “However, we expect the summer box office to be a big improvement over the first half of the year, even though it will be hard to make comparisons until September.” Comparisons to Q4:24 get a lot easier, and momentum grows with a strong slate and high release number in 2025.
Universal Pictures and Illumination’s “Despicable Me 4” opened on July 3, which made the July 4 weekend busy for AMC. The movie theater company has also benefited from Pixar’s animated hit “Inside Out 2.”
When it came out on June 14, “Inside Out 2” quickly beat “Dune: Part Two” to become the most successful movie of 2024. The movie also made $1 billion around the world 19 days after it came out, which is a record for an animated movie.
“Twisters,” a disaster movie that came out on July 19 and topped both the global and domestic box office charts on its first weekend, is another big movie coming out this summer. “Deadpool & Wolverine,” starring Ryan Reynolds and Hugh Jackman, is another big movie coming out this Friday.
Later this year, a lot of big-name movies are also coming out. For example, “Beetlejuice Beetlejuice,” the follow-up to Tim Burton’s 1988 comedy horror movie of the same name, comes out on September 6, and “Joker: Folie À Deux,” starring Joaquin Phoenix and Lady Gaga, on October 4. Paul Mescal, Pedro Pascal, and Denzel Washington star in Ridley Scott’s “Gladiator II,” which comes out on November 22. Ariana Grande and Cynthia Erivo star in “Wicked,” which also comes out on November 22.
The follow-up to the 2016 animated hit “Moana” comes out on November 27. “Mufasa: The Lion King,” another big Disney sequel, comes out on December 20.
Wedbush kept its neutral rating on AMC and its $4 price target. FactSet asked seven analysts to rate AMC. Four of them said they would hold the stock, while the other three said they would sell it.
AMC gave its guidance for the second quarter soon after announcing a deal to restructure its debt.
“With its large network of premium large-format screens and concert movie distribution, AMC can further grow its market share from 22.5% in 2023,” wrote Alicia Reese, an analyst at Wedbush, in a note on Thursday. “Upgrading theaters in Europe is another way for AMC to bring in more money.” But that’s not likely to happen until it works on “right-sizing” its balance sheet.
“These good things are overshadowed by the company’s high debt levels and lack of a dividend,” the analyst said. “However, AMC is focused on reducing its debt.”
Related: An analyst says AMC’s decision to restructure its debt is a good sign for the movie business.
AMC has about $4.5 billion in debt, according to FactSet, with about $2.6 billion of that sum in the form of bonds.
Reese described AMC’s deal to extend its debt maturities as a “significant move” but Wedbush expects the company’s EBITDA to still fall below 2024 interest expense. “EBITDA should rise in 2025 and beyond, however,” the analyst wrote. “AMC will likely raise more capital in the coming months via exchangeable notes and direct share issuances, which its shareholders continue to resist. However, AMC must cover its interest payments and conserve cash while it makes losses.”
“We expect AMC’s shares to continue to be volatile as its shareholders may boost the share price, only to see it fall again after AMC issues shares,” Reese added.
AMC will report its second-quarter numbers after market close on Aug. 2.
Related: When AMC restructures its debt, more people buy the movie theater chain’s junk bonds.
Friday morning trades show that AMC shares are up 0.4%. At the end of Thursday’s trading, they were up 9.6%, which was their biggest daily percentage gain since June 11, when they were up 10.8%. The S&P 500 index has gone up 13.2% in 2024, while the stock has gone down 16%.
