Analyst Michael Pachter kept rating at neutral, as increasing optimism over post-pandemic environment offset by concerns over debt burden
Shares of AMC Entertainment Holdings Inc. surged Monday, as the “meme” stock’s bounce from last month’s plunge continued, after Wedbush analyst Michael Pachter doubled his price target ahead of the company’s earnings report, citing an increasing optimism over the post-pandemic environment.
Pachter raised his target for the stock to $5.00 from $2.50, but that target was 38% below Friday’s closing price of $8.05. He reiterated the neutral rating he’s had on AMC since March 2020, however, saying it was “tough to get positive here, despite rising industry optimism.”
The movie theater chain’s stock rallied 5.5% in premarket trading. The stock edged up 0.5% last week, to post a third straight weekly gain. It hassoared 44.0% during that streak, which followed a two-week, 57.8% dive.
The stock had rocketed 525.5% in January, including a 301.2% jump to a more-than two-year closing high of $19.90 on Jan. 27,as part of the trading frenzy tracked to Reddit’s WallStreetBets forum, which targeted heavily shorted stocks.
Wedbush’s Pachter said he thinks AMC has taken the right reopening precautions, such as installing high-quality air filtration systems, implementing enhanced cleaning protocols and reducing seating to allow for social distancing. He said that has allowed the company to boost attendance over the past several months, despite many of its markets being closed because of the COVID-19 pandemic.
In addition, Pachter said AMC has been able to raise enough liquidity through debt and equity offerings to last through midsummer without a big box office boost.
“However, we think AMC may take years before it is able to revisit its prior growth strategy as it repays its growing mountain of debt,” Pachter wrote in a note to clients.
AMC is scheduled to report fourth-quarter results after Wednesday’s closing bell. Analysts surveyed by FactSet expect the company to swing to a per-share loss of $3.36 from earnings of 35 cents a share in the year-ago period, while revenue is expected to drop 90% to $142.3 million.
Although the FactSet consensus for per-share losses has narrowed from $3.70 at the end of February, the revenue projection has declined from $155.1 million.
Of the 8 analysts surveyed by FactSet, half have the equivalent of neutral ratings while the other half has the equivalent of sell ratings. The average price target is $2.51.
AMC’s stock climbed 279.7% year to date, and has gained 77.7% over the past 12 months. In comparison, the S&P 500 indexSPX,+1.95%has tacked on 2.3% this year and rallied 29.3% over the past year.
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