Wall Street analyst Eric Handler downgraded AMC to “sell” on Monday, despite the film chain’s recent rise in stocks and the announcement that it would not file for bankruptcy soon.
Handler, of MKM Partners, said AMC shares have been “detached” from the fundamentals and should be sold, adding that the shares could fall to $ 1 this year.
Raised by investors on Reddit’s WallStreetBets chat group, AMC shares rose more than 30 percent Monday morning. Shares of AMC stabilized at just over 6 percent, to about $ 14.10.
While shares rose $ 4.63 or 54 percent on Friday, it has now only recovered 50 percent from the 57 percent collapse it suffered last Thursday as the Robinhood trading platform continues restricting the purchase of fugitive shares.
Handler downgraded its rating on AMC to “sell,” after being neutral since May 2020. The analyst also halved its stock price target to 12 months, to $ 1 since of the $ 2, noting that while liquidity is not an issue for 2021, “achieving solvency came at a high price.”
The analyst cited the dilution of shares as a result of the company’s efforts to raise money by issuing new shares to retail investors, as well as its rising debts. He also expressed concern that the recent trading “has decoupled the price of AMC shares and their valuation.”
The analyst acknowledged last week’s positive news, meaning that prospects of short-term bankruptcy have been averted as the difficult movie chain has raised $ 1.2 billion in capital over the past two months.
“However, equity shareholders have diluted about 75 percent in the last two months and there is still about $ 5.7 billion in debt, a total that grows quarterly due to deferred interest payments which are added to the main balance, ”Handler reported. dit. “There’s also over $ 450 million in deferred rents that will one day have to be addressed.”
Handler estimates that AMC currently has about 440 million shares outstanding, based on the company’s recent presentations and market sales announcements. [ATM] stock offers and debt exchanges. This compares with the 137.4 million Class A and Class B shares the company had at the end of October.
“It wouldn’t be surprising to see AMC explore the possibility of another ATM offering as a result of the company’s high stock price,” Handler said. “Additional changes in equity debt are probably another path that management will explore.”
Shares of AMC have shot up 506 percent just this year, while the S&P 500 index has fallen 0.1 percent.