Shares of AMC, a popular meme stock, may experience a significant decline of nearly 70%, according to Citi. The investment firm has revised its price target for AMC stock from $15.50 to $4.75. This downward adjustment comes in response to several recent actions taken by the company, including a reverse stock split, an equity raise, and a conversion of equity units to common stock. Citi has maintained its sell rating on AMC, highlighting concerns about the global box office’s future and the diminishing strategic role of exhibitors in the industry. Moreover, the firm suggests that AMC’s common equity is currently overvalued.
Despite being a stock that gained popularity through memes and online speculation, AMC has seen its shares plunge by approximately 77% since the beginning of the year. This decline has brought the stock far below its all-time highs, which were achieved during the height of the Covid-19 pandemic and the meme stock craze. Citi analyst Jason Bazinet attributes this bearish outlook to the increasing prevalence of streaming services, posing a risk to the global box office. Moreover, recent industry developments suggest a potential reduction in the strategic significance of exhibitors. Bazinet anticipates that AMC will use the funds raised through the recent equity raise to pay down a significant portion of the company’s debt, amounting to around $2.1 billion.
In conclusion, Citi predicts a substantial pullback of approximately 70% for AMC shares, citing various developments within the company and the broader entertainment industry. The downward revision in its price target reflects concerns about the future of the global box office and the diminishing role of exhibitors. While AMC has experienced a significant decline in its stock price this year, it remains overvalued in the eyes of Citi analysts. The funds raised through the recent equity raise are expected to be utilized to reduce the company’s substantial debt burden.
