Shares of meme stock favorite AMC could face a significant decline of nearly 70%, according to financial services firm Citi. Citi has revised its price target for AMC stock from $15.50 to $4.75, citing recent company actions such as a reverse stock split, an equity raise, and a conversion of equity units to common stock. The firm continues to maintain a sell rating on AMC. The stock has already dropped around 77% since the beginning of the year and is far from reaching the all-time highs seen during the Covid-19 pandemic and meme stock frenzy.
Citi analyst Jason Bazinet expressed concerns over the future of the global box office due to the increasing number of streaming services. This, coupled with recent industry developments, suggests a diminishing strategic role for exhibitors. Bazinet predicts that AMC will utilize the funds raised through equity to pay off a significant portion of the company’s debt, amounting to approximately $2.1 billion. However, he still believes that the current valuation of AMC’s common equity is overpriced.
While AMC stock has been highly popular among meme stock traders, Citi’s revised price target suggests a substantial pullback is on the horizon. The downward trend in the stock is driven by recent company moves and intensified competition from streaming services. Despite the potential debt repayment using the raised funds, Citi’s analyst maintains a negative outlook on the stock’s valuation. The future of traditional movie exhibitors like AMC appears uncertain as the strategic significance of their role in the industry seems to be diminishing.