AMC Entertainment Holdings Inc. (AMC) is the world’s largest movie exhibition company, with more than 950 theaters and 10,500 screens worldwide. Its shares have soared nearly 14.6% in price over the past month. AMV is headquartered in Leawood, Kans.

However, the stock has plunged 62.6% over the past nine months and 29% over the past three months to close its last trading session at $20.24. In addition, it is currently trading 72.1% below its 52-week high of $72.62.

AMC is up against stiff competition from other direct-to-consumer streaming service providers, such as HBO Max and Peacock, whose demand skyrocketed during the COVID-19 pandemic. In addition, its lack of profitability could concern investors.

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

Inadequate Financials

AMC’s revenue increased 621% year-over-year to $1.17 billion for the three months ended Dec. 31, 2021. However, its operating loss came in at $60.4 million. The company reported a $134.4 million net loss, while its EPS came in at $0.26 over this period.

Poor Profitability

AMC’s 0.24% trailing-12-months asset turnover ratio is 46.5% lower than the 0.45% industry average. Also, its trailing-12-months ROA, net income margin and ROC are negative 11.7%, 50.2%, and 6%, respectively. In addition, its trailing-12-months of cash from operations stood at a negative $614.10 million, versus the $299.40 million industry average.

Consensus Rating and Price Target Indicate Potential Downside

Among the five Wall Street analysts that rated AMC, two rated it Buy. The 12-month median price target of $9.83 indicates a 51.4% potential upside. The price targets range from a low of $6.00 to a high of $16.

POWR Ratings Reflect Uncertainty

AMC has an overall D rating, which equates to Sell in our proprietary 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 in Stability and Sentiment. The stock’s 1.47 beta is in sync with the Stability grade. In addition, consensus price targets and ratings are consistent with the Sentiment grade.

Among the eight stocks in the F-rated Entertainment – Movies/Studios industry, AMC is ranked #7.

Beyond what I have stated above, one can view AMC’s Momentum, Growth, and Value ratings here.

Bottom Line

While AMC continues to make several strategic partnerships and operational advancements, its lack of profitability could concern investors. In addition, analysts expect its EPS to remain negative in fiscal 2022 and 2023. Furthermore, its EPS is expected to decline at the rate of 217% over the next five years. Therefore, we believe the stock is best avoided now.

AMC shares were trading at $23.08 per share on Monday morning, up $2.84 (+14.03%). Year-to-date, AMC has declined -15.15%, versus a -4.43% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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