AMC Entertainment Faces Stock Decline

Shares of AMC Entertainment Holdings Inc. plummeted by 12.3% on Thursday following the release of the fourth-quarter results of the popular movie-theater chain late Wednesday.

Stock Decline

The stock witnessed its most significant drop since November 9, 2023, falling by 13.68%, as per data from Dow Jones Market. AMC shares are now down by a staggering 98.7% from their all-time high closing price of $339.05 on June 2, 2021, amidst the meme-stock frenzy.

Recent Performance

Despite seeing a series of record lows in 2024, AMC was on a four-day winning streak before encountering this recent downturn.

Analysis

Wedbush commented on AMC's performance, noting that although the company reported better-than-expected fourth-quarter revenue and a reduced loss, driven by the success of Taylor Swift and Beyoncé's concert films, the stock still experienced a decline in after-hours trading, which extended into Thursday's trading session.

AMC Share Price Reaction

"By the share price reaction to AMC’s print, AMC’s shareholders were not pleased that AMC plans to continue issuing shares,” expressed Wedbush analyst Alicia Reese. The stakeholders are not in favor of the decision as the company is preparing for significant debt repayments in the upcoming years. A total of $5 million in 2024, $98 million in 2025, $2.9 billion in 2026, and $525 million in 2027 are due.

Debt Repayments and Cash Raise

In 2023, AMC managed to raise $865 million through the sale of AMC Preferred Equity units and common stock. During the conference call discussing the results, AMC CEO Adam Aron highlighted the importance of this cash infusion. Despite facing substantial upcoming debt payments, the company ended the year with $884 million in cash. Aron emphasized the necessity of this raise, stating that without it, the company would only have had $19 million in cash on hand.

The Key to AMC's Survival and Thriving

"The absolute smartest way for AMC first to survive and then eventually to be in a position to thrive is to have robust cash reserves, period, plain and simple," - AMC Executive

In the current economic climate, it's undeniable that having a solid financial foundation is crucial for businesses. AMC shares have seen a decline of 34.2% in the last three months, while the S&P 500 index gained 11.1%. This stark contrast highlights the importance of building and maintaining robust cash reserves for long-term success.