AMC Q2 preview: Where next for AMC stock?

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Josh Warner
By :  ,  Market Analyst

When will AMC release Q2 earnings?

AMC Entertainment is scheduled to release second quarter earnings after US markets close on Thursday August 4. It will hold an earnings webcast on the same day at 1600 CDT, or 1700 EDT.

 

AMC Entertainment Q2 earnings consensus

Wall Street forecasts the company will deliver a notable uptick in revenue to $1.14 billion. That would be up from just $785 million in the previous quarter and $445 million the year before. It is expected to report adjusted Ebitda of $87.8 million, having reported losses in both the previous quarter and the year before.

 

AMC Entertainment Q2 earnings preview

The recovery continues for cinema chain AMC Entertainment, although there is still a long way to go. The first quarter of 2022 was the best on record since the start of the pandemic and this is likely to be broken again in the second. The film slate is improving, and this has encouraged customers to return to theatres in the second quarter, when US box-office sales hit the highest level since the start of the pandemic and AMC celebrated its busiest weekend of 2022 so far.

Analysts forecast that AMC’s theatres in the US welcomed 41.6 million customers during the second quarter, more than double the number it dealt with the year before and marking a notable acceleration from the 25.6 million guests it greeted in the first quarter. The international arm is expected to have entertained over 15.0 million cinemagoers, more than treble the figure from the year before and up from 13.3 million in the previous quarter.

The return to the theatres has also been driving concession sales, which are expected to rise five-fold from last year to $252.5 million in the second quarter. However, that will be down heavily from the $380.5 million reported in the first quarter, which could suggest consumers are tightening their purse strings even if they are eager to watch their favourite movies on the big screen.

Although the recovery continues, AMC is still spending more than it makes. Wall Street believes operating costs will come in around $1.16 billion in the second quarter, outstripping revenue and rising over 57% from last year. That would also mean AMC booked $212 million in additional costs compared to the first quarter of 2022.

This will be the first quarter of positive adjusted Ebitda in 2022 and analysts hope AMC can maintain the trend and forecast it can continue to stay in the black at this level for the rest of 2022. Still, the same cannot be said for the bottom-line, with AMC forecast to continue reporting net losses both in 2022 and into 2023.

The outlook will be watched as there remains some question marks over the film slate in the third quarter, which could be a softer period before rebounding in the fourth when a wave of big-hitters are pencilled-in, including the latest titles from major franchises including Black Panther and Avatar.

AMC continues to burn through cash. Although it did manage to squeeze out one quarter of positive free cashflow in late 2021, the second quarter is set to be the first period of material positive cashflow since the pandemic decimated the entertainment industry back in 2019, with analysts pencilling-in $111.8 million of free cashflow. Still, it is expected to burn through a tiny amount of cash once again in the third quarter.

AMC has over $5.5 billion worth of long-term debt and needs to start generating cash again if it is to bring this down. It had around $1.16 billion in cash and equivalents at the end of March and this is expected to have stayed broadly flat at the end of June.

 

Where next for AMC stock?

AMC shares are currently sandwiched between the 50-day moving average at $13.64 and the 100-day moving average at $15.41.

A breakout above this channel brings the July closing-high of $17 back into play, although this could prove a tough ceiling to crack considering the RSI was on the cusp of entering overbought territory when this was last tested.

The 50-day moving average could also prove a firm floor considering this is in-line with the level of support seen on numerous occasions throughout 2022 but a slip below here brings $10.40 into play, just above the one-year low of $9.70 hit back in May. Interest in AMC has waned this year following the meme stock frenzy seen in 2021. The average-volume-at-time over the past 30 days has slipped over 20% from the 100-day average, and volumes have continued to decline when looking at the 20-day, 10-day and 5-day volumes, suggesting the stock is lacking momentum.

Notably, the eight brokers that cover AMC believe the stock is still overvalued with an average target price of just $9.09, implying the stock could fall to levels last seen back in May 2021 over the next 12 months.

Will AMC stock breakout after the upcoming earnings?

 

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