Posted on 04/09/2020 7:28:22 PM PDT by nickcarraway
MKM Partners' Eric Handler downgrades the stock to a "sell," estimating its "cash burn rate in a no-revenue environment is running at $155 million per month, which likely keeps AMC liquid until June/July." Wall Street analysts are seeing a Chapter 11 bankruptcy filing from cinema giant AMC Theatres as increasingly likely.
MKM Partners analyst Eric Handler on Thursday downgraded his rating on shares of the exhibitor from "neutral" to "sell," saying that "bankruptcy appears likely."
That followed Loop Capital analyst Alan Gould's Wednesday downgrade to a "sell" in a report that concluded: "We think bankruptcy is a distinct possibility, and at a minimum, the company will require a highly-dilutive financing."
Handler in his Thursday report explained: "Based on our view that theaters will be closed until at least August and our belief that AMC lacks the liquidity to stay afloat until that time, we expect the company will soon be faced with filing for bankruptcy. Further fueling our liquidity concerns is AMC's decision to stop paying rents to landlords effective April."
AMC, in which Chinese conglomerate Dalian Wanda Group owns a majority voting stake, has been looking for various ways to reduce costs, in late March furloughing all of its 600 corporate employees, including CEO Adam Aron, following the closure of all its cinemas. It had earlier already cut its dividend by 85 percent.
WATCH AMC Closes All U.S. Theaters Amid Spread of Coronavirus | THR News PLAY VIDEO Handler said though that even if AMC is able to tap government bailout funds, as management has signaled it plans to do, "we believe the weight of its balance sheet will make for tough sledding given the company's high leverage, thus making a reorganization inevitable." That comment was a reference to a potential Chapter 11 bankruptcy filing, which leads companies, their lenders and a court to develop a restructuring plan.
Handler highlighted that AMC, which he called "the exhibition company we view with the least financial flexibility," at the end of 2019 had $265 million of cash on hand and $332 million available on its credit lines for a total of nearly $600 million. "We believe the company's monthly cash burn rate in a no-revenue environment is running at $155 million per month, which likely keeps AMC liquid until June/July," he concluded.
Handler cut his fair value estimate for AMC's stock from $7.50 to $1 and lowered his first-quarter financial estimates. He cut his adjusted earnings before interest, taxes, depreciation and amortization estimates to a loss of $13 million, compared with a year-ago profit of $108 million. His revenue estimate went down to $931 million, reflecting "a domestic box office decline of 26 percent as theaters have been shuttered since mid-March and a 20 percent decline internationally."
Handler also cut his 2020 outlook for AMC's adjusted EBITDA to a loss of $293 million, compared with a $771 million profit in 2019. Full-year revenue he expects to fall 44 percent to $3.05 billion. The revisions assume cinemas remain closed until August.
Even a completely unlocked economy is not likely to restore this industry.
10 years from now a single sneeze will empty a theater and cause the few attendees to forswear another attempt.
And I have always enjoyed the big screen and big sound of the theater.
“I can’t think of a business that’s likely going to be hit as hard.”
Airlines. Bars and restaurants. Barbers. Taxis and buses. Gyms.
The current expenses meaning rent/lease expense (which is also higher because of inflation), upgrading sound technology (which is also higher because of inflation), new seating - most theaters around here have the reclining chairs with raised legs/feet (which is also higher because of inflation)
I've never heard anyone tell Apple when that company has record revenue, that it is because of inflation. Apple still has to pay all its expenses with current dollars, so who cares?
I don’t think they employ anyone, right now.
And they’re gonna fold.
Let them.
The theater industry may die, but it won't be because of this. It will be because movies are too expensive, comfort, food choices, and stuff like that.
Only way this pandemic kills theaters is if Bill Gates and the rest of the eugenicists get their way and can depopulate the earth.
I guess a couple of decades of downward spiralling attendance, high ticket prices, thug and gang activity inside and out, streaming media on smart phones and TVs, and Hollywood's puking out of ****ty movies has nothing to do with this, it's all about Coronavirus.
Airlines? Well, their business is down 95%, but movie theaters are down 100%. At some point, airlines will pick up as people need to get around the country for various personal and business reasons.
Bars and restaurants? Business is down but not out, but some are still open doing a takeout business. People have to eat, and home-cooking gets a little tiresome.
Barbers? Well, haircutting is a basic need. A lot of people don’t have at-home options.
Taxis and buses? It’s rough, but somewhat analogous to airlines. Business is way down but not 100%. There’s still a need among some people to get from point A to point B other than walking or their own car/bike/motorcycle.
Gyms? Yes, this one is the probably as bad or worse than movie theaters. It’s pure recreation. No one really needs it.
Not true. People with kids go the the movie theater. Both of my kids who are 30 somethings go to the movies.
Maybe ticket prices will come back down to earth.
I was thinking I don’t believe them.
Last movie I went to had uber expensive snacks, 20 minutes of commercials and previews, was too loud, was a two hour movie with no intermission and there were several rude yakkity-yaks around me.
Home theater is the new norm.
Movie theaters will go the way of drive-ins. This will just expedite that.
BLACK PANTHER was a blockbuster in Wakanda!
Judging by the abysmal box office before WuFlu, crap sandwiches weren’t selling anyway.
My bet is drive-ins will make a comeback.
The controlling interest (38%) is privately held by the Chinese company.
Ridiculous. Just move their payment due dates to after reopening. Why kill a business that made .75 billion last year???
On the subject of foreign movies, there is foreign TV.
My college friend put us on to Acorn and Britbox. These provide really good streaming TV from the UK, Canada and New Zealand. Then there is Australia. Australian TV is especially good.
They all like to produce cop shows....... lots of them
After this panic creates more germa-phoebes than ever, no one will go to the movies.
Back in the day my Mom was reluctant to go to the movies because of the Polio scares of the 1930s.
Home theater has replaced the dinosaur theater. Better to watch at the comfort of home.
Same thing happened to video stores. They just became outdated.
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