AMC Leisure inventory now a ‘promote’ at MKM, as worth goal drops to $1

AMC Entertainment Holdings Inc. stock has “decoupled” from fundamentals and should be sold, according to Eric Handler, an analyst at MKM Partners, who said the stock could fall to $ 1 this year.

The stock
AMC, + 7.69%
rose $ 1.03, or 7.8%, on Monday morning but reduced previous intraday gains by up to 30.1% while trading volume rose to 245.6 million shares.

Although the stock too rose $ 4.63, or 53.7%, on Fridayhas it now only recovered 50% of the $ 11.27, or 56.6%, slump seen last Thursday after the Robinhood trading platform restricted trading in some stocks.

Handler lowered its rating on AMC to sell it after being neutral since May 2020. He also cut his 12-month stock price target in half from $ 2 to $ 1, saying that liquidity is not an issue for 2021, a steep price. “

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He believes that with a little help from the Reddit / WallStreetBets crowd, the stock’s recent surge and volatility “decoupled” AMC’s stock price and valuation.

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Handler acknowledged that the near-term bankruptcy prospects were avoided as the struggling cinema chain raised $ 1.2 billion in fresh capital in recent months.

“However, shareholders have been diluted around 75% in the past few months and we still have around $ 5.7 billion in debt. This sum grows quarterly due to deferred interest payments that are offset against the principal, ”Handler wrote in a note to customers. “There’s also the $ 450 million backlog in deferred rents that will one day need to be addressed.”

Handler estimates that AMC currently has approximately 440 million shares outstanding based on recent company filings and announcements from ATM stock offerings and exchanges. That compares to the total of 137.4 million Class A and B shares the company had in late October.

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“It wouldn’t be surprising if AMC examined the possibility of another ATM offering due to the company’s increased share price,” Handler wrote. “An additional exchange of debt for equity is likely another avenue that management will explore.”

The stock is just up 505.7% this year, while the S&P 500 index
SPX, + 1.35%
has decreased by 0.1%.

Independently, Handler downgraded the cinema chain Cinemark Holdings Inc.
CNK, -0.49%
Too neutral on buy, says he sees limited short-term upward movement with the stock mostly back before the pandemic. Despite the downgrade, he increased his fair value estimate from $ 15 to $ 22.

In the meantime, Handler repeated his recommendation to buy IMAX Corp.
IMAX, + 1.90%
and raised his stock price target from $ 18 to $ 25. He says IMAX’s business model “makes a big difference” as the “global presence and structure of the asset light” helped navigate the COVID-19 pandemic.