Earnings season has been less than kind lately, and it's against that unfortunate backdrop that AMC Entertainment Holdings (AMC -2.01%) rolls the projector on its first-quarter results shortly after Monday's close. Investors in the country's leading multiplex operator can use a break. The stock has been cut in half in 2022, and the shares are down 81% since peaking in June of last year.
A strong financial update can help turn the negative momentum around, but that's no easy task for AMC. Box office returns so far this year have been weak, and in this climate of rising rates, it will be challenging to raise money to offset future financial shortfalls. There's still time for an applause-worthy Hollywood ending for AMC shareholders, but there's also a lot of subplots that need to resolved for that to happen.
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Reel house knives
Doctor Strange in the Multiverse of Madness is having a strong weekend at the multiplex, but 2022 has been otherwise forgettable up to this point. Domestic ticket sales through Friday night are down 45% this year compared to the same point in 2019. Analysts don't see revenue getting back to where AMC was three years ago anytime soon, and losses are projected by Wall Street pros for the next few years.
Monday's report should still have some positives packed within the unfavorable three-year comps. Analysts are modeling $734.4 million in revenue for the first three months of the year. Despite the grim comparisons to 2019 -- the last pre-pandemic year for the industry -- the top-line target is just 39% below where AMC landed for the same three-month period three years ago. AMC is gaining market share in this shrinking pie. The mutliplex operator is also experiencing a boost in high-margin concession stand sales per customer.
AMC is also expected to post a much smaller loss per share than it did in the first quarter of 2019. The $0.63 a share that investors are expecting is half the per-share deficit of 2019, but there's a pretty big catch. AMC has five times the shares outstanding now, so the actual loss should be considerably higher.
The challenges remain for AMC and all of its fellow movie theater stocks. Box office receipts in this country hit a new high in 2019, but the peak in terms of the actual number of tickets sold was 2002. Price ticket inflation is offsetting shrinking consumer demand that's been playing out over the past two decades, and the pandemic accelerated the detachment. Studios now have premium streaming services to feed fresh content, and a lot moviegoers are fine staying at home for all but a couple of releases a year.
It might not always be that way. Doctor Strange in the Multiverse of Madness kicks off a wave of big theatrical releases through the telltale summer viewing season. AMC could also announce new initiatives that open up new revenue streams, or at least make it less dependent on feature film ticket sales.
AMC might also soothe investors concerned about a puzzling investment in a gold mining penny stock in March, and heavy insider selling over the past few months. It can also ease fears about its wobbly balance sheet. AMC still has a net debt position of more than $9 billion, and with rates rising -- and its bonds falling -- new financing won't come cheap. It's not as if AMC can turn to its now out-of-favor shares to raise capital.
The good news is that with a fifth of its outstanding shares reported short a squeeze is possible if AMC has some good news to offer this week. All eyes are on the screen. AMC needs a financial blockbuster on Monday afternoon.
