AMC CEO Adam Aron has become a hero for retail investors in the meme stock era, but one analyst believes that a new offering of AMC Preferred Equity APE shares is disingenuous and bad for investors.
According to tech analyst Rich Greenfield, who has one-penny price target on AMC shares, told Yahoo Finance Live video above that Adam is spinning reality, and he has found followers who don't understand what they're investing in. It's really scary because of the new APE shares that they allow them to do is to dilute shareholders on a recurring basis. AMC stock fell by 12 percent after the preferred equity issuance announcement, before recovering to 19 percent at the end of the day and continuing its run on Monday.
Aron maintained that the issuance gives the company greater financial flexibility as the theater chain recovers from the COVID 19 epidemic.
Just six months ago, people were hollering to the heavens that streaming was the future of the world, Aron told Yahoo Finance Live. Those people weren't expecting Top Gun: Maverick to do 1.3 billion ticket sales in movie theaters. People want to go out to theaters because they want to go out to theaters. Greenfield argued that the movie theater business has changed because of streaming, especially given that the theatrical window is shortening, because of the fact that movies in theaters are in theaters are only available in theaters.
The LightShed analyst said that movies that are being released in theaters are coming to streaming services far sooner. There is a huge amount of easy-access content on streaming services. I think there will always be a reason to see a big movie in a movie theater. The bar to get you to leave your home and go to a theater is higher than it is ever been and is going higher and higher. Greenfield doesn't think the movie-theater business is going away, but he believes that AMC's valuation is far too high. AMC has no price earnings ratio because it is not posting losses. AMC trades at 3.4 times sales and has no price earnings ratio. Cinemark, its closest competitor, trades at 0.9 times sales.
Greenfield said there is a huge disconnect between reality and where AMC is trading today.
AMC's stock is more than doubled from its low this year, but it is far below the $62.55 record closing high from June 2021.
Julie Hyman is the co-anchor of Yahoo Finance Live, weekdays 9 am -- 11 am ET.