AMC Stock Gets First Buy Rating Since 2020. Why This Analyst Upgraded the Shares.

Shares of AMC Entertainment fell 83% in 2023, marking their worst calendar-year performance in history. (Justin Sullivan/Getty Images))

AMC Entertainment Holdings has been a flop. Shares of the movie-theater chain are down 17% so far this year and down 37% over the past 12 months, languishing behind the S&P 500’s respective gains of 6% and 11%. They haven’t recovered since an 83% collapse in 2023, the shares’ worst calendar-year performance on record.

It isn’t a pretty picture. But analysts at Wedbush bestowed AMC with its first Buy rating in more than five years, arguing that ay the beleaguered meme stock is poised to see gains.

AMC is among the best-known meme stocks, boasting a dedicated subreddit with more than 520,000 members. Shares exploded in 2021, spurred on by a flush of buyers who turned the tide against investors betting against the stock, and helped the company secure capital and narrowly avoid bankruptcy.

While enthusiasm has cooled down some, the stock has found a fan in Wedbush. Analysts led by Alicia Reese upgraded AMC stock to Outperform from Neutral, and raised their price target to $4 from $3. The new price target still won’t pay for a matinee seat, but it’s more than 20% above current levels.

Shares climbed 8.3% to $3.25 following the upgrade. The benchmark S&P 500 was down 0.4%.

The upgrade marked AMC’s first Buy rating among analysts polled by FactSet since March 2020, when three firms rated the stock at Buy. Thanks to Wedbush, the stock has at least one enthusiastic bull again. (FactSet considers an Outperform rating equivalent to a Buy.)

In Reese’s view, AMC is positioned to benefit from a more consistent release slate over the next few quarters as part of a postpandemic recovery. Furthermore, she believes the country’s largest theater chain could snap up more market share in 2025 and 2026 as it executes on expansion plans throughout the U.K. and the rest of Europe.

The analyst pointed out that AMC repaid or postponed all debt that was due in 2026. While this didn’t clear up issues in the longer term, it alleviated uncertainty that otherwise would have dragged on shares.

Similarly, by completing “what we expect to be the last major share issuance for the foreseeable future,” AMC has put a significant headwind behind it, Reese added. She expects AMC’s earnings before interest, taxes, depreciation, and amortization, or Ebitda, to cover interest expense in the coming quarters, relieving a potential need to issue more shares.

While Reese is upbeat on AMC’s prospects in the near term, there are limits because of the sector. “To be clear, we do not see substantial growth in 2025, 2026, or beyond,” the analyst wrote. “This is a low-growth industry in a period of recovery.”

Rather, Reese anticipates mid- to high-single-digit percentage growth rates in box office revenue over the next few years, followed by low- to mid-single-digit percentage growth thereafter.

The AMC upgrade coincided with the release of Wedbush’s film industry report, where the firm noted that June titles “generally fell below high industry expectations,” which caused some analysts to cut back their estimates leading into the second-quarter print.

Wedbush, too, has lowered its expectations. While the firm now models lower gross revenue at the box office for 2025 and 2026 compared with previous estimates, it remains bullish on the stocks in its coverage. Reese also adjusted her rating on Cinemark Holdings stock to Outperform from Neutral, and lifted her price target to $37 from $32.

In her eyes, Cinemark also stands to benefit from a more-consistent release slate over the next few quarters. By making strategic theater investments while earmarking cash for new builds and possible mergers and acquisitions, the movie theater chain can stay ahead of competitors, Reese wrote.

Wedbush reiterated Imax stock at Outperform and lifted the price target to $34 from $32. The stock is on the firm’s Best Ideas List, with analysts asserting that Imax stands to benefit from “significantly more upcoming filmed-for-Imax Hollywood and global titles.” Coupled with an expanding global footprint, this could drive market-share gains for at least the next two years, the analysts wrote.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com