The meme-stock craze might finally be over. As box-office revenues remain lower than pre-pandemic levels, the meme frontrunner AMC Entertainment Holdings, Inc. (AMC - Get Rating) still faces choppy waters.

On the other hand, in the third quarter, the company surpassed analysts’ expectations. Its adjusted EPS topped analysts’ estimates by 18.4%, and its revenue topped the consensus estimate by 0.8%.

However, the stock has declined 81.8% over the past year and 80.5% year-to-date. It has declined 30% over the past month to close its last trading session at $5.31. It is trading lower than its 50-day moving average of $6.55 and its 200-day moving average of $12.52.

Here are the factors that could affect AMC’s performance in the near term:

Weak Financials

For the fiscal third quarter that ended September 30, AMC’s revenue increased 26.9% year-over-year to $968.40 million. However, its net loss widened 1.2% from the prior-year quarter to $226.90 million. Its adjusted EBITDA declined 138.9% from the same period last year to negative $12.90 million. Its adjusted loss per share came in at $0.20.

Stretched Valuation

In terms of its forward EV/Sales, AMC is trading at 2.97x, 62.7% higher than the industry average of 1.83x. Moreover, the stock’s forward EV/EBITDA multiple of 98.91 is significantly higher than the industry average of 7.81.

Bleak Profitability

AMC’s trailing-12-month gross profit margin and EBITDA margin of 10.73% and 2.82% are 78.7% and 85.1% lower than the industry averages of 50.32% and 18.95%, respectively. Its trailing-12-month net income margin, ROTC, and ROTA of negative 20.05%, 2.06%, and 8.91% compare with their respective industry averages of 4.51%, 4.13%, and 2.30%.

POWR Ratings Reflect Bleak Prospects

AMC’s POWR Ratings reflect the company’s bleak outlook. The stock has an overall D rating, equating to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. AMC has a Value and Quality grade of D, in sync with its stretched valuation multiples and weak profitability.

The stock also has an F grade for Stability, consistent with its five-year beta of 1.76.

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

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

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

Bottom Line

The fading meme-stock craze could impact AMC’s performance in the future. Moreover, its poor profitability is concerning. As the stock is trading lower than its moving averages, indicating a downturn, the stock might be avoided now.

AMC shares were trading at $5.12 per share on Monday morning, down $0.19 (-3.58%). Year-to-date, AMC has declined -81.18%, versus a -18.50% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

More Resources for the Stocks in this Article