AMC Entertainment Bankruptcy Is 'Likely,' Analyst Says

AMC Entertainment Holdings Inc (NYSE: AMC) investors are hoping the movie business gets back to normal sooner rather than later. However, Empire Financial Research editor and research analyst Berna Barshay said things have likely gotten too desperate for AMC to avoid bankruptcy.

No New Content: Walt Disney Co (NYSE: DIS) was the latest studio to postpone a major theatrical release last month when it bumped the “Black Widow” release date from November 2020 to May 2021. At the same time, other studios are opting to skip the theater altogether and release new movies on streaming services like Netflix Inc (NASDAQ: NFLX).

Barshay said a widely available coronavirus vaccine would go a long way in convincing people to return to the theaters, but it’s unlikely AMC will be able to survive that long without bankruptcy.

“The company is running out of money, which means it's running out of time,” Barshay said.

She said concerns over the safety of movie theaters, lack of new content and mandated theater closures in New York City and Los Angeles create too many headwinds for AMC to overcome.

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Desperate Times: AMC recently launched an offer that would allow individuals to rent out an entire theater and host up to 20 people for a private screening at a cost of as little as $99. Barshay said the theater rental offer “feels like a desperate move” for AMC.

Barshay said AMC shares would likely double, triple or even more if a coronavirus vaccine were available tomorrow, but investors shouldn’t be tempted to speculate on the high-risk stock given it will likely be several more months until a vaccine arrives.

“The company could likely be in Chapter 11 bankruptcy before the first dose of a vaccine is ever administered,” Barshay said.

Benzinga’s Take: Much like Hertz and dozens of other companies, AMC’s business was strong enough before the pandemic that its brand will survive once it's over. However, Hertz filed for bankruptcy earlier this year, and its shares were recently delisted by the NYSE. Unless something drastically changes, it appears AMC is headed down a similar path.