Shares of cinema-operator AMC Entertainment (NYSE:AMC) jumped nearly 10% in early trading on the day before Thanksgiving, before settling down to end the day with a 6.7% gain. You can probably thank New York-based investment management firm Mittleman Brothers for that.
Earlier in the day, the NYC-based investment-management firm published its latest quarterly report in which Mittleman described how AMC had become one of the company's top performing portfolio holdings in the quarter ending in September 2019. Including dividends (AMC pays a big honking 10.1% annual dividend yield), AMC shares returned 17% for Mittleman in the quarter, despite box-office receipts falling 5.5% year to date at the cinema chain. These enticing returns could be what attracted new investors to the stock today.
And AMC's run may not yet be done. As Mittleman noted in its report, "a strong slate of movies on deck in Q4 (including the final Star Wars movie) might be enough to get the full year numbers closer to flat from last year's record results," erasing the declines in box-office revenue from earlier in the year. Even if that doesn't happen, if AMC continues to experience a slump in sales, Mittleman argues that the stock is "very cheap" at its current valuation of just $8.43 per share. (Mittleman thinks $27 would be a fairer price).
Is it a reasonable expectation for AMC stock to triple in price? I'm not so sure. After all, sales aren't AMC's only problem.
The company's only barely profitable, earning just $35 million on more than $5.4 billion in revenue over the last 12 months. It's burned cash (negative free cash flow) for the last three years straight, too, and is mired in debt -- more than $10.2 billion at last count on a market cap of less than $1 billion.
Most analysts polled by S&P Global Market Intelligence have predicted that AMC will lose money through the end of this year and again in 2020. Today's share-price pop just might be a good time for owners of AMC stock to head for the exits.