AMC Entertainment (NYSE:AMC) stock fell 20% on Wednesday following a strong surge in shares of major meme stocks.
The recent volatility in these stocks is tied to social media influence. The surge came after Keith Gill, better known as “Roaring Kitty” on social media, made a return to the platform X, previously known as Twitter, after being absent for three years.
Gill gained notoriety among meme stock traders in 2021 when his investment in GameStop (NYSE:GME), initially worth $53,000, ballooned into a multimillion-dollar stake as the stock’s value skyrocketed due to intense speculation and hype.
The resurgence of Gill, who has a substantial following online, contributed to the renewed interest and subsequent trading frenzy in these stocks.
When it comes to AMC, the company’s first-quarter 2024 results, reported last week, showed better-than-expected performance, fueled by an outperformance in the domestic industry box office recovery.
This was attributed to a shift in moviegoing towards premium experiences. Moreover, per patron revenue and contribution margins were approximately 36% and 44% higher, respectively, compared to the first quarter of 2019.
AMC Entertainment recently announced a series of strategic transactions aimed at reducing its balance sheet risk and annual interest expense.
The company completed an “at-the-market” equity offering, raising approximately $250 million in incremental cash. This was particularly significant given the current uncertainty in the film slate, according to B. Riley analysts.
AMC entered into an agreement to exchange around 23.3 million shares of common stock for approximately $164 million of its subordinated notes due in 2026. This move effectively eliminates about 17% of that debt tranche two years ahead of its maturity, along with more than $16 million in annual interest expenses.
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AMC’s discussions with debt holders to potentially extend maturity dates from 2026 further into the future could strengthen its financial position, analysts added.
The recent transactions have reduced the company’s overall net leverage by more than 10%, from $3.97 billion to $3.56 billion. AMC still has an estimated 191 million common shares authorized but not yet issued, which could be utilized for additional equity offerings or debt swap transactions.
“Although we remain Neutral rated with an $8 PT, we see a path to pre-pandemic AEBITDA in the coming years even on lower-than-historical attendance that could drive a valuation based on fundamentals that is well above current levels,” analysts wrote in a report.
B. Riley’s price target of $8 per share on AMC stock suggests an upside of about 60% compared to the premarket price on Thursday.
