Shares in AMC Entertainment Holdings Inc. jumped 15% after the cash-strapped U.S. theater chain presented plans to resume international theater operations over the coming three weeks.
The stock surged to $4.75 at the close on Friday even as AMC’s (AMC) CEO Adam Oren disclosed second-quarter financial results calling it “the most challenging quarter in the 100-year history of AMC”. The theater operator posted a 99% plunge in second-quarter revenue to $18.9 million year-on-year, which beat analysts’ expectations for $8 million. The company swung to a net loss of $561 million in the three months ended June 30, after a profit of $49 million in the year-ago period.
Since mid-March, AMC has been forced to close its movie theaters worldwide and temporarily suspend operations as a result of the global lockdowns triggered by the coronavirus outbreak. US theater operations remained suspended for the entire second quarter ended June 30. International theater operations resumed limited operations in early June and as of the end of June, AMC had resumed operations of 37 theaters in nine countries.
“Two months ago we started reopening theaters in Europe and the Middle East, and we currently expect to resume operations in approximately two-thirds or more of our US theaters later this month,” AMC’s Aron said. “In international markets, as of the end of July, we already have resumed operations in more than 130 theaters in all of the countries we serve in Europe and the Middle East. That is more than one-third of our international theaters, and we expect essentially all of them to resume operations in the next two to three weeks.”
Aron added that AMC has “dramatically” reduced operating and capital expenditures, to strengthen its liquidity position, which in turn will enable the company to implement its theater reopening plans. The result of all the actions during the reported quarter combined with debt restructuring extends AMC’s ability, if need be, to weather a hypothetical suspension of all its theater operations globally into 2021, he said.
As of the end of June 30, AMC had $498 million in cash, excluding restricted cash of $10.4 million.
Shares in AMC have been hard hit and have plunged 34% this year with the $4 average analyst price target indicating 16% upside potential in the shares in the coming 12 months.
Meanwhile, Wedbush analyst Michael Pachter maintained his Hold rating on the stock with a $4 price target, saying that the “release slate as currently scheduled is overly optimistic”, adding that the “probability of re-shuttering theaters and further release slate delays presents a real risk to the industry, and AMC in particular”.
“We expect a slow recovery throughout AMC’s global footprint, with Europe in the early phases of re-opening theaters, and AMC’s domestic footprint poised to re-open late August but likely not normalizing until Q2:21,” Pachter wrote in a note to investors. “We expect a slow recovery to depress results until Q2:21, with some negative long-term impacts built-in to our out-year estimates.”
The rest of the Street shares Pachter’s stock outlook. The Hold consensus shows that 6 analysts have Holds, 2 have Sells and 1 has a Buy. (See AMC stock analysis on TipRanks)
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