Citi updated its model for AMC Entertainment (NYSE:AMC) Holdings Inc today as shares in the cinema chain operator continue to surge. AMC stock is up 52% in premarket trade on Tuesday after adding 78.4% on Monday. Compared to Friday's closing price, AMC shares are up ~175%.
Citi analysts raised their price target on AMC stock from $3.10 to $3.20, while reaffirming the Sell rating. The revision follows AMC's first-quarter 2024 revenue and adjusted EBITDA, which aligned with preliminary results released on April 26th.
Citi's new target price for AMC stock reflects a scenario where the company issues equity at the current share price to pay down a portion of its debt, the broker said.
The valuation also hinges on an approximately 7.5x enterprise value to adjusted EBITDA ratio, consistent with AMC's three-year average multiple prior to the pandemic. Despite the modest target price increase, Citi's stance remains bearish, citing an overvaluation of AMC's shares at present market levels.
The Sell rating by Citi is influenced by the long-term impact of the COVID-19 pandemic on the movie theater industry, with closures across the globe causing a significant drop in global box office revenues. Citi points to the challenges facing the industry, including the growth of multiple streaming services and the potential decrease in the strategic importance of movie exhibitors.
AMC is a leading player in the theatrical exhibition sector. It operates approximately 940 theaters with around 10,500 screens, predominantly in North America. AMC's operations span across 12 countries, emphasizing its global footprint in the industry.