Analyst says AMC stock is now a ‘sell’ as price target drops to $ 1

Wall Street analyst Eric Handler demoted AMC to “ sell ” on Monday, despite the movie chain’s recent market spike and news of its intention to file for bankruptcy anytime soon.

Handler, of MKM Partners, said AMC stock has been “decoupled” from fundamentals and is expected to be sold, adding that stocks could drop to $ 1 this year.

Backed by investors in Reddit’s WallStreetBets discussion group, AMC stock rose more than 30% on Monday morning. AMC stock stabilized at just over 6% at around $ 14.10 in the midday session.

Although the stock climbed $ 4.63 or 54% on Friday, it only recovered 50% of the 57% drop it suffered last Thursday as the Robinhood trading platform continues to restrict fleeing stock purchases.

Handler downgraded his rating on AMC to “sell,” after being neutral since May 2020. The analyst also cut his 12-month stock price target in half, to $ 1 from $ 2, noting that if liquidity doesn’t ‘is not a problem for 2021,’ the solvency has been expensive. “

The analyst cited the stock’s dilution as a result of the company’s efforts to raise funds by issuing new shares to retail investors, as well as its burgeoning debt. He also expressed concern that recent trading “has decoupled AMC’s share price and valuation.”

The analyst acknowledged the positive news from last week that the prospect of short-term bankruptcy was avoided as the ailing movie theater chain raised $ 1.2 billion in new capital in the past two months. .

“However, shareholders have been diluted by approximately 75% in the past two months and there is approximately $ 5.7 billion in debt left, a total that grows each quarter due to the deferred interest payments that are applied to the principal’s balance, ”Handler told me. “There is also the excess of $ 450 million in deferred rent that will one day have to be paid.”

Handler estimates that AMC currently has around 440 million shares outstanding, based on the company’s recent filings and market announcements. [ATM] stock offerings and debt swaps. This compares to the total of 137.4 million Class A and Class B shares the company held at the end of October.

“It would not be surprising to see AMC explore the possibility of another ATM offering given the company’s high share price,” Handler said. “Further debt-for-equity swaps is likely another avenue that management will explore.

AMC stock has soared 506% this year, while the S&P 500 index is down 0.1%.