AMC Theatres Possible Bankruptcy "Too Close to Call," Analyst Says

AMC Theater New York March 20 2020

"We believe AMC has the wherewithal to remain a going concern" until October, Imperial Capital analyst David Miller said in an investors note as he raised the exhibitor's stock price target.

Imperial Capital analyst David Miller isn't yet ready to follow his Wall Street peers and declare a Chapter 11 bankruptcy filing from AMC Theatres as inevitable.

So he raised the embattled cinema giant's stock price target Friday ahead of AMC Theatres unveiling first quarter financial results Tuesday. "Because we continue to think the likelihood of a Chapter 11 filing is still too close to call at this point, and there are so many mixed signals, we are maintaining our In-Line rating, though raising our price target to $4.00 from $3.00," he wrote in an investors note.

Earlier this week, AMC disclosed that it expects its first-quarter financials, which during the second half of March were hit by the shutdown of its circuit, to include a loss of up to $2.4 billion, driven by a big impairment charge amid the novel coronavirus pandemic.

The exhibition giant also unveiled plans for a debt swap to give it additional financial headroom and included risk language that "there were substantial doubts about its ability to continue operating as a going concern." Against that backdrop, Miller argued AMC has "the wherewithal to remain a going concern" until October, despite several uncertainties over how theater rent charges get renegotiated, the structure of its reopening plans and how safe moviegoers feel when cinemas open their doors this summer.

Miller also questioned if AMC's fight with Universal Pictures over the studio shifting Trolls World Tour to premium VOD amid the COVID-19 crisis will impact whether MGM's No Time to Die release in December plays on its international screens. AMC Theatres CEO Adam Aron in a strongly worded letter sent in late April to Universal Filmed Entertainment Group chairman Donna Langley threatened to no longer play any of the studio's films after comments made by NBCUniversal CEO Jeff Shell over the on-demand success of Trolls World Tour.

With the next Universal release being Halloween Kills in mid-October, Miller predicted that "gives AMC and Universal plenty of time to sit down and reestablish a fruitful relationship" and avoid the nuclear option threatened by Aron.

Shares in AMC Theatres rose nearly 8 percent in early afternoon trading to $5.80 on Friday.