Theatrical exhibition stock AMC Entertainment Holdings, Inc. (AMC - Get Rating) was one of the top short squeeze candidates during last year’s meme stock craze. Most short-squeeze candidates from last year have fallen significantly from their highs.

AMC has lost 78.6% in price year-to-date and 85% over the past year to close the last trading session at $5.81. It is trading 87.4% below its 52-week high of $45.95, which it hit on November 8, 2021.

B.Riley analyst Eric Wold maintained a Neutral rating on the stock but has cut his stock price target from $11 to $7.50, citing that the post-pandemic box office recovery would last longer than previously forecasted.

The analyst has also lowered his third-quarter revenue estimate to $978 million from $1.09 billion, compared to the current FactSet consensus of $1.01 billion. Wold also dropped his 2022 estimate to $4.17 billion from $4.44 billion.

Wall Street analysts expect the stock to hit $3.78 in the next 12 months, indicating a potential downside of 35%.

Here’s what could influence the performance of AMC in the upcoming months:

Bottom Line in the Red

AMC’s total revenues increased 162.3% year-over-year to $1.17 billion for the second quarter ended June 30, 2022. Its net loss declined 64.6% year-over-year to $121.60 million. The company’s adjusted loss per share declined 71.8% year-over-year to $0.20.

In addition, its operating costs and expenses increased 59.5% year-over-year to $1.18 billion. Also, as of June 30, 2022, its cash and equivalents were $965.20 million, compared to $1.59 billion as of December 31, 2021.

Mixed Analyst Estimates

AMC’s EPS for fiscal 2022 and 2023 is expected to remain negative. Its revenue for fiscal 2022 and 2023 is expected to increase 64.6% and 15.9% year-over-year to $4.16 billion and $4.82 billion. Its EPS is expected to decline 217% per annum over the next five years.

Stretched Valuation

In terms of forward EV/EBITDA, AMC’s 77.87x is 883.7% higher than the 7.92x industry average. Likewise, its 3.05x forward EV/S is 59.6% higher than the 1.91x industry average.

Weak Profitability

AMC’s trailing-12-month net income margin is negative compared to the 5.34% industry average. Likewise, its trailing-12-month EBIT margin is negative compared to the 9.21% industry average. Furthermore, the stock’s 0.37% trailing-12-month asset turnover ratio is 23.7% lower than the industry average of 0.48%.

POWR Ratings Reflect Bleak Prospects

AMC has an overall D rating, equating to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. AMC has an F grade for Stability, in sync with its beta of 1.90.

AMC is ranked #5 out of six stocks in the F-rated Entertainment – Movies/Studios industry. Click here to access AMC’s Growth, Value, Momentum, Sentiment, and Quality ratings.

Bottom Line

AMC is trading below its 50-day and 200-day moving averages of $7.70 and $14.15, indicating a downtrend. Its EPS is expected to remain negative in fiscal 2022 and 2023. Moreover, Wall Street analysts expect the stock to decline in price in the upcoming months.

Given its stretched valuation and weak profitability, it could be wise to avoid the stock now.

AMC shares were trading at $5.68 per share on Thursday afternoon, down $0.13 (-2.24%). Year-to-date, AMC has declined -79.12%, versus a -20.53% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...

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