AMC Entertainment Holdings, Inc. (AMC - Get Rating) stock was recently downgraded by B. Riley analyst Eric Wold, citing drained-out box-office recovery in the post-pandemic era. The company operates 22 of the 50 highest-grossing theaters in the United States.

“Although consumer demand remains intact, in our opinion, the number of films released to theaters remains ~50% below pre-pandemic levels — which impacts both the cadence of moviegoing and the ability to catch trailers for upcoming films,” Wold said.

Shares of the retail-investor favorite of 2021 are trading below their 50-day moving average of $10.44 and 200-day moving average of $14.94. Moreover, the stock hit its 52-week low of $5.47 on October 13, 2022.

Over the past month, AMC has lost 27.1% to close the last trading session at $6.35. It has lost 76.7% year-to-date and 84.5% over the past year.

Here is what could shape AMC’s performance in the near term:

Bottom Line in the Red

AMC’s total revenues came in at $1.17 billion for the second quarter that ended June 30, 2022, up 162.3% year-over-year. Its net loss came in at $121.60 million, down 64.7% year-over-year, while its adjusted loss per share came in at $0.20, down 71.8% year-over-year. However, its film exhibition costs increased 232.4% year-over-year to $328.70 million.

Moreover, its cash and cash equivalents came in at $965.20 million for the period ended June 30, 2022, compared to $1.59 billion for the period ended December 31, 2021.

Mixed Valuations

In terms of forward Price/Sales, AMC’s 0.77x is 32.2% lower than the industry average of 1.14x. However, its forward EV/Sales of 2.97x is 55.9% higher than the industry average of 1.91x, while its forward EV/EBITDA of 62.17x is 722.9% higher than the industry average of 7.56x.

Poor Profit Margins

AMC’s trailing-12-month gross profit margin of 10.75% is 78.7% lower than the industry average of 50.52%. Its 2.40% trailing-12-month EBITDA margin is 87.1% lower than the industry average of 18.63%. Also, its trailing-12-month negative net income margin of 21.03% is lower than the industry average of 5.66%.

Moreover, AMC’s trailing-12-month ROTC and ROTA of negative 2.16% and 8.33% compared with the industry averages of 3.58% and 2.42%, respectively.

POWR Ratings Reflect Bleak Prospects

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

AMC has a C grade for Value, consistent with its mixed valuation multiples. In addition, it has an F grade for Stability, in sync with its beta of 1.90.

AMC is ranked last in the 5-stock Entertainment – Movies/Studios industry. The industry is rated F.

Click here for the additional POWR Ratings for AMC (Growth, Momentum, Sentiment, and Quality).

View all the top stocks in the Entertainment – Movies/Studios industry here.

Bottom Line

AMC witnessed astronomical stock price moves in 2021 and gained earlier this year amid the return of the meme stock mania. However, the stock could not sustain its gains due to its bleak fundamentals.

AMC’s EPS is expected to remain negative in 2022 and 2023. Moreover, its EPS is estimated to fall 217% per annum for the next five years. And given the stock’s below-par profitability, I think AMC is not worth your attention.

AMC shares were trading at $6.31 per share on Friday morning, down $0.04 (-0.63%). Year-to-date, AMC has declined -76.80%, versus a -21.92% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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