Not even the wildly successful Taylor Swift partnership could lift AMC Entertainment Holdings Inc. from a continual downturn. The most recent event was noted on Tuesday, December 12th, as the company dropped 5% in shares following the completion of its latest equity offering. The offering raised $350 million by selling around 48 million shares at an average price of $7.29 each to strengthen AMC’s balance sheet. Still, the move for more capital shows the company’s poor financial health.
The equity offer might initially seem like a positive business move, but it became a reminder that AMC is $5 billion in debt. The offering was launched on Nov. 9, along with debt repurchases and the cutting of liabilities by $62.28 million, all as a way to address the massive debt obligations the company is speculated to crumble under. CEO Adam Aron stated, “Successfully raising an additional $350 million of equity capital and reducing debt by more than $62 million in a single month underscores our continued commitment to strengthen our balance sheet by bolstering liquidity and methodically reducing debt levels.” The positive yet fluffy words of the CEO didn’t prevent AMC shares from closing 5.5% lower while being down 81.3% in the year 2023.
A financial resurgence for AMC could be on the way, with the total cash raised since September 1st being $675 million, amounting to $865 million for the entire year of 2023. Despite the plan to attack debt, the glaringly obvious size of the debt requirement and the dilution of ownership can’t be put aside for investors. To get a well-rounded analysis of AMC outside of this material event, VectorVest uses advanced software to get a big-picture snapshot of the potential recovery for the company. It considers the past, providing a future glimpse of where it might be headed; the software gets to that point using a plethora of data and financial metrics, so is AMC worth the investment?
Big Shocker; AMC is a Hard Sell!
Despite the measures taken to provide relief for the entertainment company, the analysis recommends to SELL. VectorVest software generates three summary ratings: relative value (RV), relative safety (RS), and relative timing (RT), each scored from 0.00 to 2.00, with 1.00 representing the average; then the overall VST (Value-Safety-Timing) rating provides a decisive buy, sell, or hold suggestion for a specific stock. The measures AMC took to reduce debt didn’t change the overall outlook, leading to the recommendation of SELL.
- Very Poor Upside Potential: The Relative Value score for AMC is 0.33, making it very poor on a scale of 0.00 to 2.00. It is overvalued, with a current price of $6.72 and a $0.88 value due to the debt implications.
- Poor Safety: AMC has a Relative Safety score of 0.65, which is poor on a scale of 0.00 to 2.00, so even though the CEO has a positive outlook, there is a tremendous amount of danger in investing in a company with that amount of debt with no solid plan.
- Very Poor Relative Timing: Relative timing of 0.39 is rated as very poor on a scale of 0.00 to 2.00. The metric considers the stock movements daily, weekly, quarterly, and yearly, and if you consider the crushing debt that AMC finds itself under in the long run, this is no surprise.
The overall VST rating of 0.48 is considered very poor, far below the average, and accompanied by a SELL recommendation in the VectorVest system. SELL indicates that if you own the stock, you should sell it, and if you’re not already invested, definitely don’t buy it.
Someone could analyze the company and come to a positive conclusion about the stock because of the equity offering; however, VectorVest shows the company's performance as an overview. You can see the trajectory and risks associated with the company through the Very Poor Upside Potential. In this case, AMC hopes for a future without debt, but that doesn’t align with investor success. You can learn more about how the system works or the current opportunity with any given stock through a free stock analysis today!
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VectorVest advocates buying stocks with a proper analysis to see the whole picture. AMC Entertainment Holdings LLC plummeted 5% in the market because of the remainder of its massive debt and mountain of work to recover. VectorVest helped investors visualize the financial health of the company. The stock has very poor upside potential, poor safety, and very poor relative timing, with a recommendation to SELL. Allowing you to see all the necessary components to make an informed decision.
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