Investors have approved a series of measures by AMC Entertainment (NYSE: AMC), including common stock and preferred shares, that will assist the movie theater operator in raising funds and reducing its debt.
However, the approval of these measures caused both the common stock and preferred shares to fall in value, with AMC stock falling to $4.64 −$0.82 (15.02%) by the end of the trading session on Tuesday, March 14.
Stockholders had approved a reverse stock split of 1 for 10 at a special meeting held on Tuesday and voted to increase the number of outstanding shares. Legal challenges have been filed, but if approved, the two proposals would enable the corporation to convert a newly issued series of preferred shares (ticker symbol: APE) into common stock.
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Taken collectively, the steps should provide AMC with the flexibility to issue additional stock, swap debt for shares, or undertake acquisitions. After substantially borrowing and then having its revenue collapse due to the epidemic, the theater chain has fought to remain solvent.
With the latest news on common stock and preferred shares taken into account, Finbold asked industry experts about their 2023 AMC stock outlook and factors expected to define the movie theater’s success in the market to determine if the company can regain $20.
June Jia – Owner of Canny Trading and Quantitative Researcher at GF Securities
Considering that AMC is a meme stock, the quantitative researcher suggested exploring the possibility of another short squeeze leading to a significant rise in its price.
However, Jia also pointed out that in the current tightening monetary policy environment, meme stocks are less likely to trigger short squeezes compared to the past two years, when individual investors had greater access to funds due to the Federal Reserve’s loose monetary policy.
The researcher added:
“It is highly improbable for AMC’s stock to rebound to $20 in 2023. Although AMC theaters are showing signs of a rapid recovery and are expected to achieve a positive EBITDA profit margin in 2023, the stock remains overvalued compared to other stocks. Furthermore, the impact of fundamental improvements on stock prices is a long-term factor that cannot be relied upon to enable the stock to rebound from its current price of $5.46 to $20 within a year, which would require a four-fold increase.”
Barry Weinstein – Founder and CEO of VolatilityMarkets
According to Weinstein, on March 13, before the stock split, although it is unlikely, there is still a possibility for AMC Entertainment to reach the $20 mark. Meanwhile, the CEO of VolatilityMarkets noted that AMC tends to experience quick and sharp price movements, often moving up rapidly and dropping slowly.
“If AMC stock remains as volatile as it has been, which was calculated at an astronomical 158% which is 8 times riskier than the S&P500, then the price could easily double or go to zero in its worst case scenario. Over the past 21 days the largest drawdown was -23.3% and the largest up day was 12.6%. So could AMC Entertainment start trading at $20.00? Unlikely.”
Nick Battista – Option Strategist and Trader at Tastylive
Nick Battista suggested that, before the stock split, $20 was the highest price point seen for AMC Entertainment’s stock since August of 2022. He expressed doubt in the company’s ability to recover given its massive $1 billion net loss and $5 billion in debt. However, he also acknowledged that AMC is one of those stocks where traditional financial analysis doesn’t always apply.
The Option Strategist highlighted: The Option Strategist commented that the value of AMC’s stock is driven purely by supply and demand in the market.
“With the news of the approval of yet another split, this time 10:1 reverse split, there is more than enough to go around. There will be nearly 10 billion shares outstanding – it would be nearly impossible for AMC, based on fundamentals, to reach $20 a share, which would equate to nearly $200 billion dollars in market capitalization.
AMC Wall Street analysis
In the last month, AMC has been trading in the $4.36 – $8.53 range, which is quite wide, it is currently trading near the lows of this range.
Wall Street analysts gave AMC a consensus ‘sell’ rating from 7 analysts based on its performance over the past three months. With 3 analysts advocating to ‘hold’ and 4 opting for a ‘strong sell.’
The average price forecast for the next year is $2.39; the target indicates a -48% downside from its current price.
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