$AMC Moving in the Right Direction
On August 11th, AMC Entertainment Holdings, Inc. (NYSE: AMC) won court approval for its MC Preferred Equity (NYSE: APE) restructuring plan which would allow the movie theater chain to move forward with its restructuring plan. This plan includes converting APE shares into AMC common shares, conducting a 1 to 10 reverse split, and issuing shares to raise capital that is much needed by the company. Following this news, AMC stock dropped 25% in after-hours trading accompanied by a 25% run in APE stock which is expected since now 1 APE share should be equal in value to 1 AMC share. Having said that, the outlook for AMC appears to be brighter than ever as the company can now stave off bankruptcy talk and continue improving its business, especially after the company reported its first profitable quarter in 4 years.
AMC Fundamentals
Legal Saga is Over
At long last, AMC’s legal saga has finally been wrapped up with a settlement worth around $120 million contingent on its stock’s PPS. This settlement approves the movie theater chain’s conversion plan which allows it to convert APE shares into AMC common shares, execute a reverse split, and raise capital. This plan is likely to result in AMC receiving billions of dollars which might save the company from its looming debt crises. As things stand, the company has a means of survival which is an extremely bullish indication for a company that was previously fated to impending bankruptcy.
Currently, AMC has 519 million shares outstanding and APE has 995 million shares outstanding. The sum of these two figures – 1.51 billion – adjusted by the reverse split ratio will be the stock’s new float. Once the company effects the 1 for 10 reverse split, that figure should be around 151 million shares. Taking AMC’s latest closing price of $5.2 per share, the stock’s post-reverse split PPS would be around $52.
Given that AMC has 524 million in authorized shares, the company may issue up to 373 million shares, which if priced at the stock’s latest closing price, would amount to $19 billion, more than enough to cover all of the company’s $5 billion debt. If the company is able to eliminate all of its debt by raising capital through share issuances, AMC stock would be a viable long-term investment, especially with the movie theater giant finally returning to profitability in its latest Q2 earnings. With that in mind, the company may be set to witness a much more successful quarter in Q3.
Third Quarter Blockbuster Bonanza
Q3 started off with the opening of Barbenhiemer which is projected to bring in a substantial sum to the Domestic box office. So far, Barbie alone has raised more than $500 million dollars and Oppenheimer has raised $238 million domestically making it one of the top 10 grossing R-rated movies. Barbenhiemer aside, Q3 still has a few more potential blockbusters in store like The Nun II and Equalizer 3. Considering AMC’s status as the largest movie theater chain in the world, these blockbusters would allow the company to realize substantial revenues in Q3 which might see it report a second consecutive quarter of profitability.
Shorting AMC
As is, many investors are shorting AMC stock and buying APE in anticipation of the upcoming conversion. Since AMC is more expensive, and APE stock will be converted into it, it is expected that AMC will decrease in value and APE will increase in value due to the conversion until both meet at a similar price level. However, this dip might be a short-term thing given the bullish sentiment surrounding the conversion deal since it would effectively eliminate the company’s debt.
That said, AMC is highly shorted with a short interest of 27.4% and 38.4% of its float on loan and its short interest may continue increasing in the coming days due to the strategy of shorting AMC stock and buying APE ahead of the conversion. In this way, the stock may witness a short squeeze soon thanks to the growing bullish sentiment surrounding the company’s long-term prospects following the approval of its restructuring plan.
AMC Financials
According to AMC’s Q2 report, the company’s assets decreased from $9.1 billion at the beginning of the year to $8.6 billion due to its cash balance plummeting from $631 million to $435 million. This decrease is likely due to the company paying off its current liabilities which decreased from $1.69 billion to $1.5 billion. On that note, total liabilities experienced a slight decrease from $11.76 to $11.25.
When it comes to revenue, AMC experienced a YoY increase from $1.16 billion to $1.34 billion due to marginal improvements in ticket sales which increased from $651 million to $744 million, and FNB sales which increased from $396.7 million to $488.2 million. During this time, expenses increased slightly from $1.18 billion to $1.26 billion as a result of increases in depreciation and merger/acquisition costs as well as film exhibition costs. Having said that, AMC managed to achieve profitability for the first time in 4 years this quarter going from a $121.6 million net loss in Q2 2022 to a $9 million net profit in Q2 2022 as a result of its improved revenue.
Technical Analysis
AMC stock was in a bullish trend as it was trading in an upwards channel which it has broken after the approval of its plan. Looking at the indicators the stock is below the 200, 50, and 21 MAs which is a bearish indication. Meanwhile, the RSI is oversold at 24 and the MACD is starting to curl bullishly.
As for the fundamentals, AMC recently resolved its legal battle with a settlement that will allow it to move forward with its plan to raise capital to deal with its debt situation. In this way, any fears of the movie theater chain going bankrupt should be alleviated. With the stock at 52-week lows, the current PPS could be a good entry point as the drop in after-hours last Friday may have been an overreaction.
AMC Forecast
Thanks to the recently approved settlement, AMC’s mounting debt crisis is likely behind it and the movie theater giant can now build on its successful Q2 where it returned to profitability for the first time in 4 years. Considering the successful releases of Barbie and Oppenheimer in Q3 as well as the anticipated releases of The Nun II and Equalizer 3 later this quarter, the company may be poised to post a second consecutive quarter of profitability which would boost the stock price significantly. Considering the stock’s growing short interest due to the strategy of shorting AMC stock and buying APE stock ahead of the conversion, a short squeeze may occur with more positive developments from the company – especially since it intends to start raising capital in mid-August.
AMC Fundamentals
Legal Saga is Over
At long last, AMC’s legal saga has finally been wrapped up with a settlement worth around $120 million contingent on its stock’s PPS. This settlement approves the movie theater chain’s conversion plan which allows it to convert APE shares into AMC common shares, execute a reverse split, and raise capital. This plan is likely to result in AMC receiving billions of dollars which might save the company from its looming debt crises. As things stand, the company has a means of survival which is an extremely bullish indication for a company that was previously fated to impending bankruptcy.
Currently, AMC has 519 million shares outstanding and APE has 995 million shares outstanding. The sum of these two figures – 1.51 billion – adjusted by the reverse split ratio will be the stock’s new float. Once the company effects the 1 for 10 reverse split, that figure should be around 151 million shares. Taking AMC’s latest closing price of $5.2 per share, the stock’s post-reverse split PPS would be around $52.
Given that AMC has 524 million in authorized shares, the company may issue up to 373 million shares, which if priced at the stock’s latest closing price, would amount to $19 billion, more than enough to cover all of the company’s $5 billion debt. If the company is able to eliminate all of its debt by raising capital through share issuances, AMC stock would be a viable long-term investment, especially with the movie theater giant finally returning to profitability in its latest Q2 earnings. With that in mind, the company may be set to witness a much more successful quarter in Q3.
Third Quarter Blockbuster Bonanza
Q3 started off with the opening of Barbenhiemer which is projected to bring in a substantial sum to the Domestic box office. So far, Barbie alone has raised more than $500 million dollars and Oppenheimer has raised $238 million domestically making it one of the top 10 grossing R-rated movies. Barbenhiemer aside, Q3 still has a few more potential blockbusters in store like The Nun II and Equalizer 3. Considering AMC’s status as the largest movie theater chain in the world, these blockbusters would allow the company to realize substantial revenues in Q3 which might see it report a second consecutive quarter of profitability.
Shorting AMC
As is, many investors are shorting AMC stock and buying APE in anticipation of the upcoming conversion. Since AMC is more expensive, and APE stock will be converted into it, it is expected that AMC will decrease in value and APE will increase in value due to the conversion until both meet at a similar price level. However, this dip might be a short-term thing given the bullish sentiment surrounding the conversion deal since it would effectively eliminate the company’s debt.
That said, AMC is highly shorted with a short interest of 27.4% and 38.4% of its float on loan and its short interest may continue increasing in the coming days due to the strategy of shorting AMC stock and buying APE ahead of the conversion. In this way, the stock may witness a short squeeze soon thanks to the growing bullish sentiment surrounding the company’s long-term prospects following the approval of its restructuring plan.
AMC Financials
According to AMC’s Q2 report, the company’s assets decreased from $9.1 billion at the beginning of the year to $8.6 billion due to its cash balance plummeting from $631 million to $435 million. This decrease is likely due to the company paying off its current liabilities which decreased from $1.69 billion to $1.5 billion. On that note, total liabilities experienced a slight decrease from $11.76 to $11.25.
When it comes to revenue, AMC experienced a YoY increase from $1.16 billion to $1.34 billion due to marginal improvements in ticket sales which increased from $651 million to $744 million, and FNB sales which increased from $396.7 million to $488.2 million. During this time, expenses increased slightly from $1.18 billion to $1.26 billion as a result of increases in depreciation and merger/acquisition costs as well as film exhibition costs. Having said that, AMC managed to achieve profitability for the first time in 4 years this quarter going from a $121.6 million net loss in Q2 2022 to a $9 million net profit in Q2 2022 as a result of its improved revenue.
Technical Analysis
AMC stock was in a bullish trend as it was trading in an upwards channel which it has broken after the approval of its plan. Looking at the indicators the stock is below the 200, 50, and 21 MAs which is a bearish indication. Meanwhile, the RSI is oversold at 24 and the MACD is starting to curl bullishly.
As for the fundamentals, AMC recently resolved its legal battle with a settlement that will allow it to move forward with its plan to raise capital to deal with its debt situation. In this way, any fears of the movie theater chain going bankrupt should be alleviated. With the stock at 52-week lows, the current PPS could be a good entry point as the drop in after-hours last Friday may have been an overreaction.
AMC Forecast
Thanks to the recently approved settlement, AMC’s mounting debt crisis is likely behind it and the movie theater giant can now build on its successful Q2 where it returned to profitability for the first time in 4 years. Considering the successful releases of Barbie and Oppenheimer in Q3 as well as the anticipated releases of The Nun II and Equalizer 3 later this quarter, the company may be poised to post a second consecutive quarter of profitability which would boost the stock price significantly. Considering the stock’s growing short interest due to the strategy of shorting AMC stock and buying APE stock ahead of the conversion, a short squeeze may occur with more positive developments from the company – especially since it intends to start raising capital in mid-August.
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