Is AMC Entertainment a buy?

Eric Handler, managing director and sr. research analyst for Roth, says AMC Entertainment Holdings (AMC Entertainment Holdings Inc Stock Quote, Chart, News, Analysts, Financials NYSE:AMC) financial outlook should improve, “but ongoing cash burn remains an issue.”

Handler, in a research update to clients April 16, maintained his “Neutral” rating on AMC with a target of $3.00.

Domestic box office sales fell 11.5% compared to last year, with AMC’s European theatres seeing a similar drop. Both were well below the expected 3% growth. As a result, the analyst has lowered his revenue forecast to $854 million (down 10%) and now expects a $72 million loss in adjusted EBITDA, compared to a $32 million loss last year. The previous estimates were $1.004 billion in revenue and $1 million in adjusted EBITDA.

“We are below consensus estimates, although Street numbers should move lower leading up to earnings,” Handler said. “The film slate likely proved a bit unfavourable for AMC due to a higher percentage of family films, including Mufasa: The Lion King, Dog Man, Sonic the Hedgehog 3, and Moana 2, which typically don’t fare as well in major metropolitan markets.”

He said the second quarter is off to a better start, up 94% y/y after two full weeks, thanks to the success of A Minecraft Movie, which grossed $278-million in its first 10 days of release.

Expectations for the second quarter are strong. Roth estimates revenue will rise 39% year-ver-year and 1% compared to Q2 2023. Easier comparisons should help the gains – April and May last year were down sharply, 52% and 29%, respectively, while June was only slightly lower, down 4%.

“On an absolute basis, we believe the quarter has good depth with upward of nine movies capable of surpassing $100-million versus only four movies last year surpassing that level,” Handler said. “A Minecraft Movie appears to be the likely leader for the quarter ($450mn+). Other top films should include Lilo & Stitch, Thunderbolts, Mission: Impossible – The Final Reckoning, and How to Train Your Dragon, all of which we project with $200-milliom-plus potential.”

Handler expects AMC to do $474.7-million in Adjusted EBITDA on revenue of $5,045.6-million in fiscal 2025. He thinks those numbers will improve to $580.2-million on revenue of $5,295.4-million in fiscal 2026.

Roth expects the company will use over $150-million in free cash flow this year. While it’s estimating $474.7-million in adjusted EBITDA, that compares to more than $400-million in interest payments and about $200-million in capital spending. For the first quarter, cash is expected to be around $550-million, down from $632-million at the end of 2024. That includes about $180-million raised through a stock offering. Free cash flow is expected to improve over the rest of the year, with cash projected to rise above $650-million by the fourth quarter of 2025.

“AMC has an authorization to issue up to 550 million shares, but shares held in reserve for its $414-million of exchangeable notes and for incentive stock compensation leave little if any flexibility to issue more equity without calling a special meeting or using its annual shareholder meeting,” Handler said.

Delaware recently changed its rules so that companies now only need approval from 50% of voting shareholders, rather than 50% of all shareholders, to change their by-laws. This makes it easier for AMC to move ahead with plans to increase its authorized share count, though the process will still take some time to complete.

“AMC has $47-million of debt coming due this June with another $130-million following in June 2026,” Handler added. “There is no immediate need for a cash infusion, but it appears reasonable that management would like greater financial flexibility with its balance sheet, especially since the company does not have a revolving credit facility.”