AMC Entertainment (AMC): Assessing Valuation After New 'IT' Screening Partnership With Warner Bros. and Dolby

AMC Entertainment Holdings (AMC) is generating buzz this month after revealing a partnership-driven event: select global screenings of New Line Cinema’s "IT" with exclusive behind-the-scenes looks at the HBO series "IT: Welcome to Derry." This not only brings a beloved franchise back to AMC’s Dolby Cinema screens, but also teams the company with major partners like Warner Bros. and Dolby for a one-night-only event. This collaboration has the potential to drive new traffic as fans seek both nostalgia and a preview of the new show. For investors considering their next move, this partnership highlights AMC’s ongoing efforts to boost engagement and capitalize on special experiences beyond standard blockbusters.

Looking back, AMC’s stock performance has been under pressure throughout the year, with shares down over 42% in the past 12 months and long-term returns showing deep declines. While recent momentum has been fairly muted, annual revenue still saw a modest 5% uptick, and net losses narrowed significantly thanks to more than 50% growth in net income. Events like the "IT" screenings may not reverse broader challenges overnight, but they do highlight how AMC remains focused on strategic programming and partnerships to strengthen its position.

After such a difficult run for the stock, are these kinds of headline events setting up a genuine buying opportunity, or is the market already pricing in any future growth?

Most Popular Narrative: 15.9% Undervalued

According to the most widely followed narrative, AMC Entertainment Holdings appears undervalued, with its fair value tagged well above current share levels. The narrative hinges on analysts' expectations of earnings, revenue, and future profitability converging with the broader entertainment industry.

Ongoing success in diversifying content such as direct distribution of concerts (Taylor Swift, Beyoncé, Eminem), niche film events, and alternative content reduces dependence on studio box office releases and capitalizes on demand for event-based cinema. This drives incremental revenues and revenue stability. Significant deleveraging progress, extension of debt maturities, and tight cost controls have improved AMC's balance sheet and freed up cash for reinvestment in high-return growth initiatives. These steps are expected to lower interest expense and improve net earnings over the long term.

Curious what big shifts could propel AMC so much higher? The secret lies in unique financial forecasts and an ambitious vision for profitability, with bold assumptions about margins and growth. There is a fascinating, numbers-driven path to this valuation, but it is not what most expect. Are you ready to explore the future earnings narrative that has Wall Street talking?

Result: Fair Value of $3.34 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, AMC still faces risks, including persistently lower attendance and high capital demands for premium experiences. These factors could jeopardize the recovery narrative.

Find out about the key risks to this AMC Entertainment Holdings narrative.

Another View: What Does the SWS DCF Model Say?

Taking a different approach, our DCF model looks at AMC’s cash flows to estimate fair value. The result supports the earlier view, but DCF calculations involve many assumptions, so the outlook could shift on new data.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out AMC Entertainment Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own AMC Entertainment Holdings Narrative

If you see things differently, or want to dig into the numbers yourself, you can build your own AMC story in just a few minutes. Do it your way

A great starting point for your AMC Entertainment Holdings research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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