Brace for an 80% crash in AMC shares: Wedbush Securities

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on Aug 23, 2022
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  • Wedbush Securities analyst says AMC shares should be worth $2.0 only.
  • AMC had its preferred equity units debut on the NYSE a day earlier.
  • The stock has already tanked roughly 60% over the past couple of weeks.

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AMC Entertainment Holdings Inc (NYSE: AMC) has tanked roughly 60% over the past couple of weeks but the pain is far from over, says Alicia Reese. She’s an Equity Research Analyst at Wedbush Securities.

AMC shares should be worth $2.0 only

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On Tuesday, Reese reiterated her “underperform” rating on AMC shares and lowered the price objective to $2.0 that represents about an 80% downside from here.

The dovish call comes a day after AMC had its preferred equity units (APE) debut on the New York Stock Exchange, which the analyst sees as effectively a two-for-one stock split.

APE in effect created a two-for-one stock split, with half listed under AMC and half under APE. At the end of APE’s first day, the combined shares lost $800 million in enterprise value from Friday’s closing price of $18.01.

Box office ticket sales are still weak

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It’s the “dilution” that lowers the share price after a two-for-one stock split. The preferred stock ended Tuesday at $6.0 while AMC was way above at $10.46. Reese noted:

While it makes little sense for APE to trade below AMC, we think that it reflects concerns over impending dilution.

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Other headwinds still in the face of AMC Entertainment Holdings Inc include not enough blockbusters to fuel a significant increase in the box office ticket sales. On top of that, added competition from the “streamers” is also weighing it down.

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Earlier this month, however, the world’s largest cinema chain said it lost less money in its fiscal second quarter than the analysts had forecast.

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