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Why AMC Entertainment Stock Jumped Before Earnings

By Rich Smith - Updated Mar 8, 2021 at 11:24AM

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And why it might not last.

What happened

Shares of beleaguered movie theater owner AMC Entertainment Holdings (AMC -10.28%) jumped more than 10% in early trading Monday, before settling down to about a 6% gain as of 10:20 a.m. EST.

Little girl holding popcorn in a theater covers her eyes

Image source: Getty Images.

So what

Wedbush Securities doubled its price target on the stock this morning, arguing that AMC has raised enough cash by this point to keep it solvent through at least midsummer. This could give the company a chance to survive until vaccinations permit the economy to reopen, and moviegoers begin returning to theaters.

Wedbush also praised the steps AMC has taken to prepare itself for a reopening, installing air filtration systems in its theaters, establishing enhanced cleaning protocols, and spacing out seating to preserve social distancing, MarketWatch reports today.  

Now what

Why wasn't it able to hold on to all of its gains? Wedbush may have doubled its price target, but only to $5 a share, and AMC stock already costs more than $8.50. So that analysis isn't quite as optimistic as "doubled its price target" makes it sound. Wedbush has only a neutral rating on the stock, and appears to be predicting more than a 40% downside to the price. "We think AMC may take years before it is able to revisit its prior growth strategy as it repays its growing mountain of debt," Wedbush says.

And there's even more bad news ahead. AMC reports its fourth-quarter earnings on Wednesday, and analysts anticipate a loss of $3.61 per share on an 89% decline in revenue. When those results come out, this movie could morph from a rom-com into a disaster flick in a hurry.

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AMC Entertainment Holdings, Inc. Stock Quote
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