The future for AMC Entertainment (NYSE:AMC) was looking as dark as the theaters it was forced to close due to the COVID-19 pandemic, but an analyst says the lights may go up again after all.

Almost two months after MKM Partners analyst Eric Handler said bankruptcy "appeared likely" for AMC, the Wall Street pro now says the threat has "lessened considerably," and he hiked his fair value estimate of the theater operator's stock from $1 per share to $5 per share.

Sad couple at theater

Image source: Getty Images.

Ready for a curtain call

There was good reason for the dire warning. AMC had slashed its dividend, its executives agreed to take deep pay cuts, and it closed all its theaters in a bid to conserve cash. Even the theater operator's creditors were planning on it going bankrupt, having hired lawyers who specialize in restructurings.

But a few weeks later, AMC arranged a private placement of $500 million in new debt that forestalled the possibility of bankruptcy. Now Wall Street is coming around on the country's largest theater owner being able to make it through the worst of the crisis with plenty of money on hand, albeit with some caveats.

In a note to investors, Handler wrote, "We are still concerned about AMC's net leverage and absolute level of debt, but believe with the expected reopening of the company's circuit within the next two months there is sufficient cash on hand to get through the end of the year."

Handler also changed his rating on the stock from sell to neutral, though it's ultimately imperative for the movie house chain to have content to show when theaters reopen.