AMC Stock – AMC CEO Adam Aron praised his new investors who disagree with Wall Street
AMC Empire 25 near Times Square is open as New York theaters reopen for the first time in a year after the coronavirus shutdown on March 5, 2021.
Angela Weiss | UKTN | Getty Images
To the world, Adam Aron is the CEO of AMC Entertainment, but to millions of cinema operator investors, he is “Silverback.”
While AMC is still losing money, Aron was bullish during Thursday’s earnings call, thanking millions of Redditors and Robinhood traders who raised the company’s shares earlier this year.
AMC said it had 3.2 million individual shareholders as of March 11, who own about 80% of the 450 million shares outstanding. Many of them were inspired by the r / wallstreetbets Reddit page to buy the stock. The forum selected several companies that were bypassed by large hedge fund groups and decided to take action.
On January 27, AMC’s stock exploded overnight, dropping to less than $ 20 per share from $ 5 the previous trading day. The surge enabled AMC to reduce its debt by approximately $ 600 million. The stock is currently trading above $ 9 a share. The shares were trading around 6% on Friday.
“These individual investors probably own the majority of our shares,” Aron said on Thursday’s conference call. “They own AMC. We work for them. I work for them.”
As AMC’s new investors rally around the stock, Wall Street analysts are a bit more bearish when it comes to the company’s performance. And although Aron has embraced them, analysts are pushing back harsh comments on Twitter and angry phone calls to their desks.
What Wall Street sees
Right now, the average target price for those who cover the industry is $ 4.44, according to FactSet. Eric Handler, analyst at MKM Partners, recently set his target price for the share at $ 1.
The goal is based on an analysis of the company’s capital structure and its significant debt of over $ 5 billion. He also has $ 450 million in deferred rent payments.
For AMC to justify its current share price, its Adjusted EBITDA would need to exceed its all-time high of 16%, Handler wrote in a note to investors. Or be 60% higher than its current estimate for 2022.
With the reopening of its rooms, revenues are starting to flow again. In the first quarter, AMC reported revenue of $ 148.3 million, down 84.2% from the same period a year ago. Its net loss fell to $ 567.2 million, or $ 1.42 per share in the quarter, following a loss of $ 2.18 billion, or $ 20.88 per share, a year earlier.
The theater chain has been able to raise capital quickly in recent months, with Aron touting that AMC ended the first quarter with $ 1 billion in cash, the most it has ever had in its 100 years of business. ‘history. With this money in hand, AMC says it can stay afloat until 2022.
There is heightened optimism on the part of analysts about the movie industry, particularly as vaccination rates rise and Covid cases decline. However, many agree that it could take years for AMC to pay off its debt and even longer until it is able to revise its growth strategy.
And then there is its new pool of investors.
The ascent of the apes
“We expect continued volatility in AMC stocks, as well as business momentum unrelated to AMC fundamentals,” Wedbush analyst Alicia Reese wrote in a research note a week before AMC does not publish its results. “As such, we do not recommend buying AMC stock here.”
Analysts have told UKTN that the very stock market frenzy, while well-intentioned, shows a lack of knowledge about how financial markets work. Investment, they say, is based on emotion.
These new investors, many of whom have only bought the stock in recent months, call themselves “monkeys”. The name derives from an internet meme based on the movie “Rise of the Planet of the Apes” in which the main character, a chimpanzee named Caesar, communicates the phrase “monkeys together strong” using American Sign Language.
The phrase has been adopted by retail investors who are bullish on heavily sold stocks like GameStop or AMC. The idea being that if the “monkeys” are united, they can outlive those who are short of stock.
“Adam [Aron] was very complimentary from retail investors, “Handler said in an interview.” They clearly support it. And put their money where it is … stocks are where they are right now thanks to these retail investors. “
In appreciation, Aron said he and AMC will each donate $ 50,000 to the Dian Fossey Gorilla Fund, a conservation fund dedicated to protecting endangered mountain gorillas. This is the first time the company has made a donation to this organization and it is a clear nod to these new investors.
AMC has delayed its annual meeting of shareholders by more than a month in order to give these investors the opportunity to attend the event and “have their important voices heard,” Aron said.
“Just go to Twitter, just go to Reddit, just go to YouTube, read what these people are writing,” he said. “They love AMC. And these are not people who are just going to be investors in AMC. They will be AMC customers who come to our theaters and enjoy watching movies in our theaters as paying guests.”
Due to these new investors, Aron said the company will change the way it disseminates information to its shareholders.
“Before, when I wanted to speak to the ownership of the company, I could fly to Beijing and I could sit with three or four people and they have 75% of the vote,” he said. “It’s going to be a little different now … so you’re going to see a lot more awareness among millions of investors in our business and it will be quite public.”
“I started tweeting again,” he said.