Meme stock AMC beats estimates in Q1: ‘they need to raise capital’

Meme stock AMC Entertainment Holdings Inc (NYSE: AMC) ended slightly down on Friday even after reporting market-beating results for its first financial quarter.

How is this meme stock positioned for a recession?

The cinema chain attributed its second straight quarter of positive adjusted EBITDA since the start of the pandemic to ongoing recovery in the box office.

More importantly, Geetha Ranganathan of Bloomberg Intelligence is confident that movie entertainment will hold up well in the midst of an economic downturn.

Moving going tends to be a cheaper form of entertainment. It has held up very well even during recessionary periods. We’ve seen this time and time again.

Year-to-date, AMC shares are currently up about 45%.

Wall Street remains ‘underweight’ on AMC stock

Number of screens that AMC Entertainment operates decreased by 1.0% in the recent quarter.

Still, attendance came in up nearly 22% versus last year. On Yahoo Finance Live, the senior media analyst added:

Overall, the sentiment for theatres is pretty positive. When we started out, we were thinking about $8 billion to $8.5 billion for domestic box office. That’s gone up now to close to $9 billion to $9.5 billion.

Nonetheless, Wall Street currently has a consensus “underweight” rating on this meme stock.

AMC Entertainment Q1 financial highlights

Lost $235.5 million versus the year-ago $337.4 million
Per-share loss also narrowed from 33 cents to 17 cents
Adjusted loss printed at 13 cents per share in its Q1
Revenue went up 21.5% year-on-year to $954.4 million
Consensus was 16 cents loss on $938 million in revenue

It is also noteworthy that both Apple Inc and Amazon.com Inc are reportedly interested in spending $1.0 billion each on movies (find out more). According to Ranganathan:

Good thing for AMC is they over index to premium large format. They have largest number of IMAX screens, recliners seats, all the bells and whistles. So, they’re able to aggressively charge both on tickets and concessions.

Debt remains a problem for AMC shares

Nonetheless, Ranganathan did agree that about $5.0 billion of debt continues to be a problem for AMC shares.

On Friday, the movie theatres company confirmed in a press release that it has sold around 21.2 million APE units for additional gross proceeds of $34.2 million in its current quarter. The Bloomberg analyst noted:

I think for a long-term sustainable business, they obviously do need to raise capital at some point and dig themselves out of this debt hole.

Success in raising more capital put together with continued strength in the box office could be a major catalyst for this meme stock, she concluded.