Not just AMC Entertainment: AMC Networks stock has imploded

AMC Entertainment’s (NYSE: AMC) stock price has imploded this year amid concerns about the box office industry, its huge debt load, and dilution. It has crashed by 90% in the past 12 months and by 90% in the past five years.

AMC stock price has dropped

A company whose market cap peaked at $37 billion in 2021 is now valued at just $1.8 billion. Its total outstanding shares have risen from 51 million to over 263 million this year. Some of this dilution happened in May this year as the stock surged during the mini meme stock frenzy.

AMC stock, outstanding shares and market cap

Analysts believe that AMC’s biggest challenge is that the box office industry is not recovering as fast as expected. Its most recent financial results showed that its first-quarter revenue dropped from $862 million in Q1’23 to $851 million in Q1’24.

AMC continued losing money in the last quarter. Its net loss came in at $163 million, a drop from the $235 million it lost in Q1’23. The company is not expected to turn a profit this year, a move that will strain its balance sheet.

The other big concern is that AMC faces key maturities in the coming years. It faces over $3 billion maturities in the next few years. On the positive side, the company reached a deal with its creditors this week. This deal will see it extend its $2.45 billion maturities from 2026 to 2029. 

The deal also allowed the company to reduce its debt load by converting some of this debt load to equity. While this is a good deal for AMC, investors will need go through another dilution worth about $464 million.

Still, as I have written before, there are signs that AMC has now become a bargain since its key issues are being solved. For example, the box office industry is in a steady recovery as evidenced by Inside Out, which made $1.44 billion, Dune ($711 million), and Despicable Me ($577 million).

As such, with the debt issue now in the rearview mirror, there is a likelihood that AMC Entertainment stock will bounce back. Such a speculative move will accelerate if the Federal Reserve decides to start cutting interest rates in September.

The next important catalyst for the AMC stock price will happen on August 8th when the company publishes its quarterly financial results. 

AMC Networks stock has dived too

It seems like the name AMC is not doing well. The AMC Networks (AMCX) stock price has dived by 42% this year and by 82% in the last decade. This drop has brought its valuation from over $3.5 billion in 2020 to $467 million today. Its market cap peaked at $5.1 billion in 2016.

AMC Networks stock price has dropped because of the ongoing woes in the television industry, as we have written on Warner Bros. Discovery. 

The issue is two-fold: advertising revenue has dropped while cord-cutting has affected the distribution revenue it receives from cable companies like Charter, Comcast, and DirecTV.

As a result, the company’s annual revenue has dropped from over $3 billion in 2018 to $2.7 billion in 2023. Its annual profits have also retreated from $380 million to $215 million in 2023.

The most recent results showed how bad things have gotten for AMC Networks. Its revenue dropped by 16.9% in Q1 to $596 million while its adjusted operating income fell by 30% to $149 million.

Analysts expect that its financials will continue struggling this year. Its revenue is expected to drop by 12% to $601 million. For the year, analysts expect that its revenue will drop by 11.4% to $2.4 billion. 

Another key issue is that it has substantial levels of debt. It ended the last quarter with over $2.2 billion in long-term debt against $690 million in cash. Most recently, the company issued $125 million in convertible debt a month.

AMC Networks stock price forecast

AMCX chart by TradingView

The weekly chart shows that the AMCX share price has been in a strong bearish trend in the past few months. It has then found a strong support level at $9.98, where it has failed to move below since May last year. It is hovering at this level.

The stock has also formed a descending triangle chart pattern, a popular bearish sign. It has also moved below the key support at $19.66, its lowest swing in 2020.

AMC Networks stock price has moved below the 50-week and 100-week Exponential Moving Averages (EMA). Therefore, the stock will likely continue falling in the near term as sellers target the next key support at $8. 

The next key catalyst to watch will be the company’s financial results on August 9th. Strong financial result will lead to a potential downtrend.