AMC stock price analysis: is it really worthless?

AMC (NYSE: AMC) stock price plunge is not easing as most of its holdouts continue dumping it. It crashed to a new low of $2.95 on Monday, meaning that it has lost over 51% of its value this year and by 91% in the past 12 months.

Valued as a worthless company

AMC’s current equity valuation implies that Wall Street believes that the company has no value at all. The crash has brought its total market capitalisation to over $793 million, much lower than its peak of over $33 billion.

This valuation is also lower than the cash that AMC holds on its balance sheet. It ended the fourth quarter with over $884 million. This cash balance is set to increase after the company filed to raise additional capital in March.

AMC’s real valuation is negative because of the liability side. While it has loads of cash in its balance sheet, it also has a mountain of debt. The current portion of its long-term debt stands at $25 million while its total long-term debt is $4.5 billion.

AMC Entertainment has other notable liabilities. Capital leases have moved to over $4 billion. It also has some pension liabilities worth $33 million.

These figures are dire for AMC, a company that will struggle to get to profitability this year. The average revenue estimate for this year is $4.49 billion followed by $5.12 billion in 2025. However, the company is expected to lose $1.6 per share this year and 81 cents in 2025.

Therefore, the company will need to work hard to improve its profitability in the coming years. That’s because it faces a big $3 billion maturity in 2026. If its finances don’t improve, there is a possibility that it may need to file for bankruptcy protection.

Some analysts believe that Chapter 11 protection would be ideal for AMC as it would let it to negotiate its debt. The management has already issued this warning in its last 10k report.Such a move would wipe out equity investors though.

Is it safe to buy AMC stock?

AMC chart by TradingView

However, some investors are still optimistic that the company will rebound as the movie industry continues its slow recovery. In its most recent earnings call, Cinemark, another theatre chain, warned that the movie industry will go through headwinds this year. The CFO said:

“Our capital allocation priorities remained balanced and disciplined, as we prioritize addressing our 2025 maturities and investing in the long term, while managing through content volume headwinds this year.”

This statement means that Cinemark and AMC could go through a deep slowdown this year. Such a move would erase the gainst that AMC made in 2023 because of the strong blockbuster movies that were released, including Barbie and Oppenheimer.

However, some analysts believe that movies are back. In a note last week, a Wells Fargo analyst upgraded Cinemark, noting that there were 76 titles scheduled for 2024 and 2025. He expects that the likes of The Fall Guy, Inside Out 2, and Mufasa will lead to more traffic.

Therefore, as I have written before, I believe that AMC stock is a high-risk and high-reward investment for now. This means that the stock could crash to zero in a worst-case scenario. The alternative is where the company goes through a short squeeze if recovery hopes rise.

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