AMC's summer box office set to 'rebound notably' says Wedbush

By James Rogers

AMC cited the lingering impact of the Hollywood actors and writers strikes when it gave second-quarter guidance this week

AMC Entertainment Holdings Inc. is set to benefit from an improved summer box office, according to analyst firm Wedbush.

The movie-theater chain and original meme stock gave second-quarter guidance on July 24, with AMC (AMC) noting that the Hollywood actors and writers strikes had created lingering weakness.

"North American box office ended down 27% YoY on a tough comparison and as last year's Hollywood labor strikes reduced the volume of titles out this year," wrote Wedbush analyst Alicia Reese, in a note released Thursday. "That said, we expect the summer box office to rebound notably from the year's first half, albeit against difficult comparisons until September. Q4:24 comparisons ease significantly, and momentum grows with a solid slate and robust release volume in 2025."

AMC recently enjoyed a busy July 4 weekend, boosted by Universal Pictures' and Illumination's "Despicable Me 4," which opened July 3. The chain has also reaped the benefits of Pixar's animated blockbuster "Inside Out 2."

Related: AMC's stock falls as movie-theater chain highlights weakness in its Q2 guidance

"Inside Out 2," which opened June 14, quickly surpassed "Dune: Part Two" to become the highest-grossing film of 2024. The movie also hit a $1 billion worldwide box office 19 days after its release, setting a record for an animated film.

Other major releases this summer include disaster movie "Twisters," which opened July 19, and topped the global box and domestic box office on its opening weekend, and Marvel Studios' eagerly-anticipated "Deadpool & Wolverine" starring Ryan Reynolds and Hugh Jackman, which opens Friday.

A host of big-name movies are also set for release later this year, including "Beetlejuice Beetlejuice," the sequel to Tim Burton's 1988 comedy horror film, which hits theaters Sept. 6, and "Joker: Folie À Deux" starring Joaquin Phoenix and Lady Gaga, which opens Oct. 4. Ridley Scott's "Gladiator II," starring Paul Mescal, Pedro Pascal, and Denzel Washington, opens Nov. 22. and "Wicked" starring Ariana Grande and Cynthia Erivo, opens the same day.

"Moana 2," the sequel to the 2016 animated blockbuster, opens Nov. 27, and another major Disney sequel, "Mufasa: The Lion King," hits theaters Dec. 20.

Related: AMC's stock climbs on debt-restructuring deal

Wedbush maintained its neutral rating and $4 price target for AMC. Of seven analysts surveyed by FactSet, four have a hold rating and three have a sell rating for AMC.

AMC gave its second-quarter guidance shortly after announcing a debt-restructuring deal.

"AMC can further expand market share from 22.5% in 2023 with its vast network of premium large-format screens and concert movie distribution," wrote Wedbush analyst Alicia Reese, in Thursday's note. "AMC can also drive revenue growth in Europe with theater upgrades. However, it is unlikely to do so until it works through balance sheet right-sizing."

"The company's heavy debt load and lack of dividend overshadow these positive factors, but AMC is focused on alleviating its debt," the analyst added.

Related: AMC's debt restructuring bodes well for box-office recovery, analyst says

AMC has about $4.5 billion in debt, according to FactSet, with about $2.6 billion of that sum in the form of bonds.

Reese described AMC's deal to extend its debt maturities as a "significant move" but Wedbush expects the company's EBITDA to still fall below 2024 interest expense. "EBITDA should rise in 2025 and beyond, however," the analyst wrote. "AMC will likely raise more capital in the coming months via exchangeable notes and direct share issuances, which its shareholders continue to resist. However, AMC must cover its interest payments and conserve cash while it posts losses."

"We expect AMC's shares to continue to be volatile as its shareholders may boost the share price, only to see it fall again after AMC issues shares," Reese added.

AMC will report its second-quarter results after market close on Aug. 2.

Related: AMC debt restructuring sparks more buying in the movie-theater chain's junk bonds

AMC shares are up 0.4% in premarket trades Friday after ending Thursday's session up 9.6% to register their biggest daily percentage gain since June 11, when they rose 10.8%. The stock is down 16% in 2024, compared with the S&P 500 index's gain of 13.2%.

-James Rogers

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07-26-24 0858ET

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