Shares of meme stock favorite AMC could face a significant decline of nearly 70%, according to Citi. The investment firm has lowered its price target on AMC stock from $15.50 to $4.75, citing recent company actions such as a reverse stock split, an equity raise, and a conversion of equity units. Citi also maintains a sell rating on AMC, while the stock has already dropped around 77% since the beginning of the year. The firm highlights the proliferation of streaming services and the decline in the strategic importance of theater exhibitors as factors contributing to the downside risk of the global box office.
Citi analyst Jason Bazinet suggests that AMC is likely to utilize the funds from the equity raise to pay off a significant portion of the company’s total debt, estimated at $2.1 billion. Despite this, Bazinet still considers the common equity stock of AMC to be overpriced at current levels. The stock remains far from its all-time highs witnessed during the height of the Covid-19 pandemic and meme stock frenzy. The analyst emphasizes the diminishing role of exhibitors in the industry, and the potential impact it may have on the company’s future prospects.
In conclusion, Citi’s analysis indicates that AMC shares may experience a substantial pullback in the near future due to the company’s recent moves and industry developments. The proliferation of streaming services and the reduced importance of exhibitors are seen as risks to the global box office. Despite the potential use of raised funds to address debt, Citi suggests that AMC’s common equity stock is still overvalued. With the stock down significantly from its previous highs, the future of AMC remains uncertain in the evolving entertainment landscape.