Sell your AMC stock, Roth says

After updating his financial model on AMC, Roth MKM analyst Eric Handler remains bearish on AMC (AMC Stock Quote, Chart, News, Analysts, Financials NYSE:AMC).

The analyst says AMC’s high debt level gives him pause, as does the company high valuation and low or even negative projected cash flow generation.

“There is cause for optimism about the 2025/2026 box office slates, but it will likely take several years for AMC to grow into its balance sheet and substantially diluted overall share count,” he argued.

Handler outlined the company’s current capital structure.

“AMC ended 1Q with cash of $624mn. We have modeled cash burn of $335mn in 2Q, but positive FCF of $155mn in 2H, which diminishes the need for additional equity raises. Total debt is $4.453b after a recent $164mn debt-for-equity swap. Interest expense is now on a $346mn/ year run rate. The diluted share count, following the recently completed ATM offering and debt swap, is at roughly 325mn (leaving a decent cushion between the outstanding shares and the authorized maximum of 550mn shares), or ~14x larger than at the start of the pandemic”

In a research update to clients June 5, the analyst maintained his “Sell” rating and price target of $4.00 on AMC. Shares of AMC closed June 5 at $5.15.

Handler thinks the company will post EBITDA of $239.3-million on revenue of $4.56-billion in fiscal 2024. He thinks those numbers will improve to EBITDA of $585.7-million on a topline of $5.26-billion the following year.