AMC (NYSE: AMC) stock price has had a tough start of the year. It has crashed by more than 25% year-to-date as some investors worry about its future. Some are even wondering whether the theatre chain will survive this year. This year’s losses mean that the stock has plunged by more than 89% in the past 12 months, giving it a market cap of just $1.15 billion.
Is this fear warranted?AMC Entertainment, which became a hit during the meme stock mania, has become a hated company with a short interest of almost 10%. It has angered many investors mostly because of the regular dilutions. It raised over $865 million in 2023 to address its substantial challenges and reduce its debt. This trend has led to a sharp increase in the number of outstanding shares
Most recently, the company announced that it would swap its equity for debt in a bid to pay its substantial debt and the situation is not good. The company holds over $4.75 billion in debt and an accumulated deficit of over $7.8 billion. For a company that is incinerating cash, to a scale of over $400 million, these are huge numbers.
The other concern is that the box office industry seems like it will have a muted performance this year. Some of the highly anticipated movies this summer are the likes of Deadpool, Beetlejuice, and Ghostbusters. While these are acclaimed movies, I doubt they will have a similar impact like last year’s Barbie, Oppenheimer, and Taylor Swift’s Eras Tour.
These releases pushed AMC to have a great performance in the quarter. Its total North America box office revenue rose by 38% to $2.7 billion while its adjusted EBITDA jumped to $193 million. The company’s total attendance in North America jumped by 34.4%. While these numbers were good, they will be difficult to replicate this year.
Looking forward, I believe that AMC will likely survive – not thrive – in 2024. It will likely continue to dilute its shareholders in a bid to lower its debt burden. By the third quarter, the company had reduced its total debt by $372 million. It has paid over $764 million since January 2022.
So, is AMC Entertainment a good investment? AMC is, without a doubt, an incredibly cheap company. Its stock has crashed from over $300 during the meme stock frenzy to less than $5 today. However, this cheapness has been a value trap for most people. Therefore, I’d only start buying AMC if it shows improvements on revenue growth and commits to not raise additional capital.
AMC stock price forecast
The daily chart shows that the AMC share price has been in a freefall in the past few months. Most recently, the shares have plunged below the key support level at $6.90, the lowest point on September 8th. The shares remain below the 50-day and 100-day moving averages, signaling that bears are still in control.
The RSI shows that the stock has gotten extremely oversold as it sits at 14. Therefore, the outlook is currently bearish, with the next support point to watch being at $4. In the long term, the stock could bounce back. This will likely happen after its earnings report in March.
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