AMC Entertainment Upgrade Signals Better Times Ahead

U.S. movie chain AMC Entertainment Inc. (AMC) is trading higher in Monday’s pre-market after B. Riley Securities upgraded the stock from ‘Neutral’ to ‘Buy’ with a Street-high $13 price target. The news comes just days after the Centers for Disease Control (CDC) gave the OK for fully-vaccinated Americans to resume air and railroad travel without prior testing due to low odds for contracting or transmitting the COVID-19 virus.

‘Godzilla vs. Kong’ Roars at the Box Office

The timing couldn’t be better, at least from Hollywood’s viewpoint. “Godzilla vs. Kong” just posted the strongest box office of any movie release since March 2020, earning an estimated $48.5 million at 3,064 cinemas between Wednesday and Sunday. The film was also released on the HBOMax streaming service, making in-person attendance figures even more impressive.  Imax Corp (IMAX) also reported a strong opening at its high tech theaters, earning $4.5 million on 284 screens.

However, Riley analyst Eric Wold also expressed caution due to the company’s high debt load, which was incurred to avoid bankruptcy, noting “Our only concern and reason for the prior Neutral rating had been the high levels of debt on the balance sheet and the strain this could place on future cash flows. However, with management increasingly signaling the ability and willingness to utilize equity to reduce the debt load, we can now be more constructive on the upside opportunity for the shares.”

Wall Street and Technical Outlook

Wall Street consensus remains skeptical despite growing optimism about the post-pandemic world, with an ‘Underweight’ rating based upon 1 ‘Buy’, 5 ‘Hold’, and 4 ‘Sell’ recommendations. Price targets currently range from a low of $1.00 to a Street-high $13.00 while the stock is set to open Monday’s session nearly $3 above the median $7.00 target. This high placement tells us that Main Street is more optimistic about AMC’s long-term outlook than market insiders.

The stock topped out at 36.13 in 2015 and entered a steep decline, driven by the relentless rise of streaming-video-on-demand (SVOD). It fell to 1.95 during March 2020’s pandemic decline and bounced above 7.00 during the summer months. Bears took control once again in the first half of winter’s second wave, with price finding support just four cents below the prior low in January. The subsequent bounce has completed a double bottom reversal that confirms the first uptrend in six years.

For a look at all of this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.