AMC should avoid ‘distractions’ like credit cards, popcorn and dive deeper into IMAX, analyst says

AMC Entertainment Holdings Inc., which announced its 12e quarterly loss on Tuesday, should avoid the “distractions” of its many new business ventures and dive deeper into its IMAX partnership, says Wedbush analyst Alicia Reese.

“We believe AMC’s focus on new business ventures and potential display acquisitions is misplaced,” she wrote in a note released Wednesday. “We believe in the alternative content business, but believe AMC should let IMAX lead the charge given its deep partnership and IMAX’s expertise.”

The analyst pointed to AMC’s AMC,
-9.16%
partnership with Fathom Events and its efforts to bring alternative content such as UFC fights and live concerts to its screens as positives. “For some AMC alternative content expansions, it will continue to partner with Fathom while for other alternative content, it is seeking new partnerships with content owners,” she wrote. “We believe AMC would be wise to partner with IMAX given IMAX’s push towards alternative content and the already strong partnership between the two companies – AMC has 186 IMAX screens in its national footprint and 36 IMAX screens in its international footprint.”

Meme stock darling AMC describes itself as the largest movie theater company in the world, with approximately 940 theaters and 10,500 screens worldwide.

See now: AMC shares fall after posting 12th straight quarterly loss

Reese also pointed to IMAX’s IMAX,
-3.40%
Announcement in June of an extended partnership with Odeon, subsidiary of AMC, to expand its IMAX footprint in Europe. On the other hand, she does not think that this week announcement with Zoom Video Communications Inc. ZM,
-8.55%
turning some AMC theaters into so-called Zoom theaters will result in a significant revenue contribution.

Likewise, Reese is disappointed with the movie channel plans to launch an AMC-branded credit card and sell AMC Perfectly Popcorn in grocery stores. “AMC continues to tout its new business ventures, like popcorn and now its Zoom partnership, while seemingly leaving crypto ventures behind,” she wrote. “We are less optimistic than AMC about the potential of these companies.”

The analyst thinks AMC should keep its $5.2 billion debt balance in its sights. “We believe AMC needs to focus its attention on debt repayment, especially as its APE EPA,
-12.81%
stocks are now unlikely to provide him with the large cash cushion he had anticipated,” she wrote.

Wedbush has an “underperforming” rating and $2 price target for AMC.

See now: AMC’s stock increased thanks to “Zoom Rooms” partnership with Zoom

Speaking on the conference call to discuss AMC’s results, CEO Adam Aron said the company will introduce more IMAX screens and more Dolby Cinema screens. The theater chain also plans to add more iSense large format screens and more Prime screens. Additionally, AMC is spending about $250 million to introduce laser projection to about half of its auditoriums.

Aron also discussed AMC’s foray into the gold and silver mining business on the call. The company stunned Wall Street earlier this year when it invested $27.9 million in Hycroft Mining Holding Corp. HYMC,
-4.40%,
a gold and silver miner that operates well outside of AMC’s core business. Last week, Hycroft announced the second set of results from its exploration drill in northern Nevada, Aron explained. Hycroft, he said, discovered more gold and more silver “in those hills”. The miner has also discovered significantly higher quality ore deposits, he added.

As expected, AMC had a relatively lackluster August and September with a dearth of big movie releases, though Aron said he was optimistic about movies coming out in the fourth quarter, such as Walt Disney Co.’s DIS. ,
-11.97%
“Strange World,” James Cameron’s “Avatar: The Way of Water,” and Damien Chazelle’s “Babylon,” plus releases in 2023. The CEO also highlighted early bookings for “Black Panther: Wakanda Forever,” and is confident it will be one of the biggest films of the year, potentially second only to ‘Top Gun: Maverick’ in ticket sales.

However, Third Bridge analyst Jamie Lumley thinks the coming months could still be tough for AMC. “Optimism of a better-than-expected summer box office season has been tempered in recent months, and it’s critical that the holiday season brings increased traffic to AMC,” he said in a statement. emailed to MarketWatch. “With fewer franchise films and blockbusters on the slate going forward, this could be a tough end to the year for the company.”

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AMC shares fell 6.8% before Wednesday’s opening bell, outpacing the 0.6% drop in the S&P 500. The company’s stock is down 68.6% this year, compared to the SPX of the S&P 500 index,
-0.64%
down 20.2%.