The AMC (NYSE: AMC) stock price continued its freefall on Thursday after the company issued a weak forward guidance. It plunged by over 6%, bringing the year-to-date losses to over 50%. In the past few years, the company’s market cap has moved from over $10 billion to about $881 million.
Results were not as bad as expectedLooking at AMC’s quarterly results, my view is that the company’s results were not as bad as I expected given how tough the box office industry has been lately. Its total revenues dropped from $954.4 million in Q1’23 to $951.4 million in the last quarter. This figure was close to the $1.2 billion it made in Q1’19.
The company’s revenue dropped because of the weaker attendance in the US and international markets. Its total attendance came in at over 46.6 million, down from 47.6 million. It was also affected by last year’s strikes.
The other notable data in its report is that the company narrowed its loss substantially. Its net loss improved by $72 million to $162.7 million as the company continued to slash its operation costs.
AMC’s stock crashed because the company offered a weaker revenue guidance for the second quarter. In his statement, Adam Aron, its CEO said:
“While the second quarter box office will continue to be affected by the 2023 Hollywood strikes, we continue to be ebullient about the upcoming film lineup in the second half of 2024 and throughout 2025.”
In addition to strong movies slated for later this year, the company plans to partner with more artists following last year’s success of Taylor Swift’s Eras Tour film. The first act will be Billie Eilish, one of the most popular artists today.
AMC has also worked to boost its balance sheet. It has reduced its principal debt by over $974 million since January 2022. While that has led to significant dilution, I believe that it was the right thing to do because of its vast amounts of debt.
Altogether, I believe that AMC will continue to gain market share in the box office industry. And while this year’s movies will likely not match the success of Barbie and Oppenheimer, those slated to come will attract millions of people. As noted, despite its challenges, it managed to attract over 47 million people in Q1.
The main risk for AMC stock is that it will likely need to raise cash again. It ended the quarter with about $624 million in cash and equivalents, down by about 30%. If the losses continue, it will need to replenish its finances through an equity raise.
The other top risk is that the company faces maturities worth almost $3 billion in 2026. As such, it will likely channel its surplus cash towards these maturities. Also, it is unclear whether the management’s plans to extend debt maturities will work out. I believe that it will be in their interest to do that.
AMC stock price forecast
Fundamentally, AMC has several catalysts since it is the biggest player in the industry. There is also a possibility that its sector will recover later this year.
Technically, the stock has remained below all moving averages, which is a sign that bears are in control. On the daily chart, it has formed a small double-top pattern at $3.47, which explains why it made a bearish breakout after earnings.The upper side of the double-top was along the upper side of the descending channel.
Therefore, in the near term, I suspect that the situation will get worse, which could see it retest the lower side of the channel at around $2. In the long term, however, I believe that the stock has room to rebound, as I wrote here.
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