Should AMC Entertainment Manage To Disclose Upbeat Q2 2022 Earnings Today, It Would Seriously Curtail the Hubris of Bearish Fund Managers Such as Clifford Asness [Updated]

AMC

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.

AMC Entertainment (NYSE:AMC) is about to disclose its Q2 2022 earnings with its proverbial head held high. After all, the company is likely to have witnessed its strongest quarter in the post-COVID era, benefitting from a marked increase in global theater attendance as well as average ticket prices.

For Q1 2022, AMC had reported $785.7 million in revenue, exceeding consensus expectations by over 5 percent. Similarly, an adjusted EBITDA of -$61.7 million for the quarter corresponded to a year-over-year improvement of $233 million.

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Crucially, AMC expects to continue recording sequential improvements in its cash burn, culminating in a positive operating cash flow in the fourth quarter of 2022.

As part of AMC's Q1 earnings call, its CEO Adam Aron had issued a veiled threat to short-sellers, promising to "pounce" on the stock's detractors at an opportune time:

"We are constantly exploring the smartest courses of action, and I promise you that we will pounce, but only when the timing is right."

On the fundamental front, the company recently retired $72.5 million of its debt at a discount. The movie theater chain has also acquired a 22 percent stake in the gold miner, Hycroft Mining.

As far as Q2 2022 is concerned, analysts expect the company to report $1.18 billion in revenue vs. $444.7 million in the corresponding period last year. Adjusted EPS estimates are currently pegged at -$0.23.

This brings us to the crux of the matter. The disgraced pharma executive Martin Shkreli had taunted AMC bulls last month by publishing his bearish take on the stock on Reddit. As per Shkreli's blog post, AMC can only expect to generate $3 billion to $4 billion in admission revenues and $800 million in EBITDA annually in the best-case scenario. Consequently, Shkreli has accorded an $11 stock price target to AMC shares, based on a 7 percent discount rate and a return to $5 billion in total revenues per annum. By the end of this decade, Shkreli sees AMC printing around $7 billion in annual revenues.

However, Shkreli was not the only prominent figure to have taken a dig at AMC recently. Clifford Asness' AQR Capital had disclosed a short position in AMC back in June while challenging the bulls to "try to hurt us."

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After the tweet above, Asness tried to defend his short position by terming it a joke.

However, the fact remains that AMC is up around 80 percent relative to its year-to-date low of $10.37 on the 11th of May. Consequently, should the company post stellar results today, the stock's ensuing gains are likely to chip the "money" that Asness claims to have made on AMC this year. We wait with bated breath.

This post will be updated with AMC's earnings once they are released.

Update: AMC Entertainment Announces a Special Dividend Comprising of Preferred Shares

AMC has reported $1.166 billion in revenue for Q2 2022 against expectations of $1.18 billion. Theatre attendance grew by 168 percent on an annual basis to 59 million people. Crucially, the company reported a positive adjusted EBITDA of $106.7 million, corresponding to an annual improvement of $257.5 million.

Moreover, the theatre chain produced positive operating cash of $52 million - well ahead of the fourth quarter of 2022 when AMC was previously expected to achieve this milestone. The company has also reported a non-GAAP EPS of -$0.20 vs. expectations of -$0.23.

Finally, AMC has announced a special dividend comprising of preferred shares:

"Shareholders will receive one AMC Preferred Equity Unit for each share of AMC common stock owned. Based on 516,820,595 issued and outstanding Common Stock, the Company expects to issue a dividend of 516,820,595 AMC Preferred Equity units."

Bear in mind that each Preferred Equity Unit entails the same rights as those conferred by the company's common stock. Moreover, such units might be convertible into common shares, pending shareholder approval.

Source: https://www.nasdaq.com/market-activity/stocks/amc

AMC shares are currently down nearly 6 percent in after-hours trading as the company missed consensus revenue expectations by $20 million.

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