By Senad Karaahmetovic
Shares of AMC Entertainment (NYSE:AMC) are down about 38% in pre-market Monday after the embattled movie theater chain Cineworld (OTC:CNNWF) says it is considering filing for bankruptcy in the US.
While the company insists it remains “open for business,” Cineworld is struggling with $5 billion worth of debt.
"Cineworld would expect to maintain its operations in the ordinary course until and following any filing and ultimately to continue its business over the longer term with no significant impact upon its employees."
The company is considering different options for its business, including a Chapter 11 filing in the US. Shares plunged 60% on Friday after the WSJ reported that Cineworld is likely to file for bankruptcy.
B. Riley analyst sees limited impact on other movie theater chains as Cineworld's balance sheet is “a company-specific issue.”
AMC Entertainment, Cinemark Holdings (NYSE:CNK), and Marcus Corp . (NYSE:MCS) “are well positioned to push through that weak slate and we do not see any reason for investors to be incrementally concerned,” the analyst said in a client note.
B. Riley sees a positive setup on all three stocks amid “the positive attendance and per patron spending dynamics over the past 6-12 months.”
In other news, the AMC Preferred Equity units (or “APEs”), are scheduled to begin trading on the NYSE under the ticker symbol “APE” on Monday, 8/22.
The analyst sees APEs as “a clever way for management to take advantage of the enthusiastic retail interest in the common equity over the past 18 months.”
The analyst has an $11 per share price target on the Neutral-rated AMC stock.
“We acknowledge the path to a greater valuation will be dependent on how quickly management takes advantage of this situation to de-lever the balance sheet and/or create new growth paths within or outside the exhibition industry,” the analyst concluded.