AMC Stock: Analysts are still bearish on AMC Entertainment

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AMC Entertainment (NYSE:CMA) has been a favorite meme stock. Even with losses of 34% in 2022, AMC stock has gained around 90% over the past year. In its fourth quarter and full year 2021 results, Adam Aron, Chairman and CEO of AMC, said that “AMC’s fourth quarter 2021 results represent our best quarter in two full years” and that “while we are not yet where we want to be, our progress is substantial and unmistakable”. Should you be excited about AMC stocks now due to improved trading performance?

AMC did indeed show improvement in key metrics in FY21. Revenue increased to $1.17 billion from $1.62 million in FY20. Operating metrics, such as US and international market footfall increased by 96.31% and 30.3%, respectively. However, the company remained unprofitable, although it reduced its net loss to negative $1.27 billion from negative $4.59 billion in fiscal 2020. AMC continued to burn cash, recording a flow negative free cash flow of $706.5 million, lower than the negative free cash flow figure of $1.23 billion for fiscal 2020.

AMC’s decision to make a significant investment in Hydroft Mining (NASDAQ:HYMC), a company uncorrelated to AMC’s business model, should worry AMC investors for two reasons. First, Hycroft Mining’s finances are not strong. It loses money and burns money. Why choose to invest in a loss-making company with bad fundamentals? How does this investment add value to AMC shareholders? I don’t see any logic in that.

Second, it’s obvious that AMC Entertainment is transforming into something more than just an entertainment industry company. I am not convinced that its shareholders will be satisfied with this radical change.

Analysts seem right to be bearish on the outlook for AMC shares. A one-year target of $10.45 on Yahoo! Finance and one median price target of $6 per share on CNN Business showing disbelief that AMC’s stock will soon see better days. With a “net loss of 80 cents per share for 2022 and a net loss of 40 cents in 2023” expected, AMC stock is not a buy.

As of the date of publication, Stavros Georgiadis, CFA does not hold (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

Stavros Georgiadis is a CFA charter holder, equity research analyst and economist. He focuses on US stocks and has his own stock market blog. laborsesoninternet.com. He has written various articles for other publications in the past and can be contacted at Twitter and on LinkedIn.

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