AMC stock price has collapsed to a record low as investors continue worrying about its huge debt mountain, long track record of dilution, and an expected soft year for the box office. The shares, which were trading at almost $400 have plummeted below $4. What was once a $30 billion company has become a $1 billion firm. 

Is this the next Bed Bath & Beyond?

AMC and Bed Bath & Beyond have a few things in common. For one, the two companies had a major market share in their respective industries, with AMC being the biggest movie theatre company in the US. 

They were also highly popular in 2021 when the meme stock craze intensified. At the time, BBBY stock price surged to almost $50 per share, giving it a market cap of over $6 billion. Most importantly, they all carried mountain of debt in their balance sheets.

After surging during the meme coin frenzy, Bed Bath & Beyond went bankrupt in 2023. AMC is still going on but it has substantial problems. It carries over $4 billion in total debt and more than $7 billion in deficits. 

The company has also been highly dilutive to its shareholders as it has pushed its total outstanding shares to 200 million. This is notable since AMC had less than 10 million shares a few years ago, meaning that investors have seen their value dissipate,

The challenge for AMC is that it is burning a lot of money, which is not ideal for a company that is attempting to engineer a turnaround. Analysts expect that it is burning over $400 million annually and the trend could continue.

Box office sales to drop

The other challenge is that the prospects for the Box Office industry are not good. For one, the company benefited substantially from last year’s Barbie and Oppenheimer craze. As a result, its revenue in the last quarter jumped to $1.4 billion as millions of Americans went to watch these movies. It also turned an operating profit of $125 million.

However, this year is expected to be in trouble with no major comparable releases scheduled. Analysts believe that Box Office sales will drop sharply this year because of last year’s strikes. Data shows that sales will be about $8 billion this year, down from $9 billion in 2023. Global ticket sales are expected to drop by 5.7% to $31.5 billion, with some of the top movies being Deadpool and Ghostbusters.

These are not good numbers for a company that is fighting for survival. At this stage, AMC should be growing its sales, reducing its costs, and boosting its profitability. This will be difficult to engineer.

Therefore, the question now is whether AMC will be bankrupt like Bed Bath & Beyond. This is possibility because of the factors mentioned above. The only benefit is that AMC is still generating revenue and has over $730 million in cash. 

Also, and sadly to investors, AMC is still a billion-dollar company, meaning that it could engineer a way to raise funds, probably by offering convertible debt. 

AMC stock price risk/reward

AMC stock price

AMC share price chart

At this stage, AMC is being valued as a company that is about to go bankrupt. To some extent, bankruptcy would be a good option for the company. This is where it files for Chapter 11, reorganizes its finances, and then either lists or gets acquired.

Therefore, at this stage, I believe that AMC stock has favourable risk/reward metrics. This means that an investor who allocates some money in the company has two outcomes. First, they could lose all their money if the company goes bankrupt as most investors seem to believe.

On the other hand, there is also a possibility that the company will bounce back, especially if it publishes an encouraging report. As such, February 28th will be an important day for the company as it releases its results.

Analysts expect that its revenue came in at $1 billion in the last quarter down from $1.4 billion in Q3. It made $990 million in the same quarter in 2022.We have seen such situations in the past. Most recently, Plug Power stock price jumped sharply after the company posted an update about its fundraising. Remember that the company had issued a going concern statement in November.

By Crispus Kanyaru

With a keen eye for market trends and a knack for translating complex financial concepts into engaging narratives, Crispus has established himself as a trusted voice in the world of finance. His work has graced the pages of esteemed publications like Benzinga, Forbes, Invezz, and Banklesstimes, reaching a diverse audience eager to navigate the ever-evolving financial landscape. Crispus's journey began with a deep curiosity about the forces shaping the global economy. This natural inquisitiveness led them to pursue a degree in finance and CPIA, equipping them with a solid foundation in financial theory and analysis. But Crispus knew that knowledge alone wasn't enough. He craved to bridge the gap between dry data and real-world experiences, to make finance accessible and relatable to everyone.

Leave a Reply

Your email address will not be published. Required fields are marked *