AMC Entertainment Holdings Inc. is set to reap the benefits of better-than-expected box-office results, according to Roth MKM.
“Higher-than-projected box-office results are causing us to raise our 3Q estimates,” Roth MKM analyst Eric Handler wrote in a note released Tuesday. Roth MKM raised its AMC third-quarter revenue estimate to $1.304 billion from $1.209 billion, an increase of 35% year over year and down just 1% from the third quarter of 2019, before the COVID-19 pandemic hit. The analyst firm also raised AMC’s
AMC,
adjusted EBITBA estimate to $161 million from $116 million.
AMC’s domestic box-office market share should improve on a year-over-year basis as a result of strong Imax Corp.
IMAX,
results, boosted by the success of the summer blockbuster “Oppenheimer,” according to Roth MKM.
Related: AMC enjoys ‘best week ever’ for box-office revenue, fueled by ‘Barbie’ and ‘Oppenheimer’
Reflecting the movie-theater chain and meme-stock darling’s recent 1-for-10 reverse stock split, Roth MKM also increased its AMC price target to $5 from 50 cents.
Shares of AMC ended Wednesday’s session down 7.1%, outpacing the S&P 500 index’s
SPX
decline of 1.3%.
“Oppenheimer” and fellow blockbuster “Barbie” fueled AMC’s “best week ever” for admissions revenue, the company said in July. Some 65 U.S. locations also set single-week box-office records, including 13 locations in the greater Los Angeles market, according to AMC. The movie-theater chain also enjoyed its busiest weekend since 2019, boosted by the openings of “Barbie” and “Oppenheimer,” a cultural phenomenon that was dubbed “Barbenheimer.”
Related: AMC had its busiest weekend since 2019, boosted by ‘Barbie’ and ‘Oppenheimer’
During the summer, AMC also announced that “Taylor Swift: The Eras Tour” had shattered the company’s record for single-day advance ticket sales, with $26 million in ticket sales revenue on Aug. 31.
AMC is showing Taylor Swift’s eagerly-anticipated concert film in its theaters and is also a theatrical distributor for the record-setting movie. But Roth MKM does not see AMC’s distribution business as transformative. “AMC received a lot of press when it announced on 8/31 it would serve as the distributor for ‘Taylor Swift: The Eras Tour’ movie and again a month later for ‘Renaissance: A Film by Beyonce’,” Handler said in the note. “However, we view distribution as a low return/margin business.”
“Distribution fees for most major movie studios range from 10%-15%,” he added. “We believe AMC undercut studio rates to partner with Taylor Swift and Beyonce, with a fee in the 5%-6% range, is responsible for marketing and promotion, and is paying Variance Film who is coordinating bookings.”
Related: ‘Taylor Swift: The Eras Tour’ sets records, becoming the biggest-ever Imax opening for a film by a musical artist
AMC did not immediately respond to a request for comment.
Cash burn also remains an issue for AMC, according to Roth MKM. “We assume further share issuances will be coming to maintain a comfortable liquidity level,” Handler said.
Roth MKM maintained its sell rating for AMC. Of seven analysts surveyed by FactSet, four have a hold rating and three have a sell rating for AMC.
Read the full article here