Pro: AMC is a good investment, just ‘not for the faint of heart’

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on Jun 4, 2021
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  • Analyst says AMC will be on the receiving end of a massive pent up demand.
  • There is a disconnect between analyst price target and what company is doing.
  • The company has raised $1.246 billion in equity capital in the second quarter.

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Ben Emons of Medley Global Advisors was on CNBC to discuss the reasons for continuing to hold the shares of AMC Entertainment Holdings Inc. (NYSE: AMC), which he first bought in the fall of last year.

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AMC shares are up 2.9% in morning trading and have been highly volatile over the past few weeks rising by more than 4.5 times in the past one month. AMC, a so-called meme stock, is a favourite among the followers of Reddit board WallStreetBets.

AMC is a reopening play

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Emon thinks that AMC stands to benefit from the reopening as people would head to watch movies again. He said:

“If the reopening is real and if it is sustained, then companies like this [AMC] will become profitable. It has extreme volatility and it’s not for the faint of the heart.”

He further added that AMC is a bellwether of Mall America and once venues open, companies like AMC will be on the receiving end of a massive pent up demand.

He also added a note of caution by advising investors to trade AMC as long as the weight in the portfolio is set conservatively at 1% maximum.

Disconnect between analyst price target and what company is doing

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15 analysts following the stock have an average price target of $5.11 on AMC while the stock opened at $58.10 today morning.

Emon thinks there is a disconnect between the analyst price targets and the company has been doing in recent months. He added:

“The company is trying to really structure its balance sheet taking advantage of these volatility spikes in the stock. And that has actually helped the stock move higher.”

This week AMC completed an equity raise of $587.4 million by selling 11.55 million shares at an average price of approximately $50.85 per share. This was on top of the $658.5 million already raised this quarter resulting in a total equity raise of $1.246 billion in the second quarter.

AMC CEO Adam Aron indicated that the company will be using the proceeds to deleverage its balance sheet.

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