Brace for an 80% crash in AMC shares: Wedbush Securities

AMC Entertainment Holdings Inc (NYSE: AMC) has tanked roughly 60% over the past couple of weeks but the pain is far from over, says Alicia Reese. She’s an Equity Research Analyst at Wedbush Securities.

AMC shares should be worth $2.0 only

On Tuesday, Reese reiterated her “underperform” rating on AMC shares and lowered the price objective to $2.0 that represents about an 80% downside from here.

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The dovish call comes a day after AMC had its preferred equity units (APE) debut on the New York Stock Exchange, which the analyst sees as effectively a two-for-one stock split.

APE in effect created a two-for-one stock split, with half listed under AMC and half under APE. At the end of APE’s first day, the combined shares lost $800 million in enterprise value from Friday’s closing price of $18.01.

Box office ticket sales are still weak

It’s the “dilution” that lowers the share price after a two-for-one stock split. The preferred stock ended Tuesday at $6.0 while AMC was way above at $10.46. Reese noted:

While it makes little sense for APE to trade below AMC, we think that it reflects concerns over impending dilution.

Other headwinds still in the face of AMC Entertainment Holdings Inc include not enough blockbusters to fuel a significant increase in the box office ticket sales. On top of that, added competition from the “streamers” is also weighing it down.

Earlier this month, however, the world’s largest cinema chain said it lost less money in its fiscal second quarter than the analysts had forecast.