Wedbush Equity Research Analyst Alicia Reese joins Yahoo Finance Live to discuss the outlook for AMC Entertainment.

Video Transcript

- Let's take a look at AMC. You're looking at gains right now in extended hours, up nearly 4%. And a couple of big headlines in this report. Fourth quarter adjusted loss per share coming in at $0.14. That was a narrower than expected loss here. The estimate on the Street was for a loss of $0.21. Revenue coming in at 990.9 million, beating the estimate of 977.6 million.

A couple of comments here from CEO Adam Aron in this earnings release, saying that the revenue per patron of $19.90 was well above pre-pandemic levels. He attributed some of that to the rising ticket sales. Obviously, AMC benefiting from that, at least in his view, in this most recent quarter. AMC also saying that they expect the recovery will continue quickly here in 2023.

Let's talk about these results. We want to bring in Alicia Reese, Wedbush equity research analyst. Alicia, it's great to have you here. So just your initial take on the release and what it means just in terms of what we could expect from AMC in the coming quarters.

ALICIA REESE: Yeah, so their results were pretty great. Topline beat, EBITDA beat. The expectations for EBITDA were negative 13. They came in at positive 15. We were at flat. So it's positive any way you look at it. Earnings, as you said, beat the expectations, as well, and the per-caps were better than expected. So the per-caps indicate that AMC has gained and continued to hold onto some market share gains in the fourth quarter.

What we saw and what we'd expect to continue into the first quarter is that they held onto those market share gains because patrons continue to go to premium large-format screens, and AMC has a huge swath of them, IMAX, in particular. They're the largest purveyors of IMAX screens, also Dolby. And then they have their AMC class-- AMC proprietary large-format screens, as well.

And "Avatar," of course, played not only on the premium large-format screens, but in 3D, which is another premium onto the ticket. So AMC is just well-positioned for those premium blockbusters like "Avatar." So we'd expect them to hold onto those market share gains in the first quarter, as well.

- Yeah, "Avatar" helps drive the ticket prices, but perhaps not making up for "Top Gun" when it comes to attendance. You look at US attendance down nearly 5 million. Global attendance down, as well, from 49.58 million from 53 million in the prior quarter. Of course, that's only part of the story. How do you evaluate the stock past and future, given the meme trade here?

ALICIA REESE: Sure. So in terms of the attendance, you know, the whole box office, the North American industry box office was at about 65% of pre-pandemic levels, of 2019 levels in '22. We expect that to come up to at least 75% in '23, and then rebound even further beyond that.

Whether or not we see a rebound all the way to 2019 levels on an attendance level, because people are opting for more premium screens, we don't have to see as many. And the blockbusters are doing great. It's just the volume of content isn't quite back to where it used to be. A lot of those smaller titles haven't been coming out quite as much. But we do expect that to rebound.

In terms of the meme trade, that's just meant that AMC continues to trade higher than its peers on a valuation standpoint, on an EBITDA basis. And you know, that's why we have an underperform rating on it, because we value it in terms of where it traded pre-pandemic and along with its peers.

- Alicia, what do you make of-- obviously, the stock was off to the races yesterday after the Delaware court said that it will hold that preliminary injunction hearing on April 27th. Of course, that could potentially delay the APE conversion. When you're trying to figure out what all this means here for AMC from an analyst perspective, how are you just sifting through all of these headlines to really get at the true value of what you think is for AMC?

ALICIA REESE: Sure. So, you know, just so far, how many shares of AMC and APE have they issued so far, and use that for valuation methods. You know, and then their performance and what I expect them to get to in 2024 or 2025, in terms of EBITDA. So in terms of that, it's pretty straightforward.

Whether or not they're going to be able to pass the proposals that they have for later in March is-- you know, that's up for debate, certainly, and we have not included that yet, you know, the additional shares or the reverse split. We will do that once it is passed. It looks like AMC is positioning itself very well for that to pass, but of course, as you know, there is that-- you know, the lawsuit against them to try to prevent that.

- Adam Aron in the release said he expects Hollywood to release 75% more major movie titles this year than it did in 2022. That is a massive number. We'll see if that comes to fruition. He's always entertaining as the CEO. Here's what he said about another surprise, a partnership with Walmart popcorn. Listen.

Posting video of their new popcorn partnership with Walmart. We heard about this last year, but now it seems to have come to fruition. Is this anything for investors to pay attention to, or just fun?

ALICIA REESE: You know, concessions are typically a very high-margin part of a movie theater's business. It's, you know, almost complete margin drop-through. It's very inexpensive to, you know, buy popcorn in bulk. And you know, it's not like they have a lot of packaging in distributing it, and certainly not a lot of labor costs in preparing it at the movie theaters.

Of course, that's going to be lower-margin if you're, you know, popping at a, you know, a facility and then distributing to stores. And initially, you know, they're not-- they're only going to be in hundreds of stores. But, you know, a little later in the year, they're going to have, I think, upwards of 2,600 stores. So, you know, assuming the margin's a bit lower, that-- you know, some of that could fall to the bottom line and kind of give a little bit of cushion for profitability. I don't expect it to be a game-changer, but it can provide a nice cushion.

- Do you like the butter at the movie theaters, Alicia?

[LAUGHING]

ALICIA REESE: I do not, no. But they have, you know, a non-butter, low-salt--

- Oh my god, I love that stuff.

ALICIA REESE: --offering, as well. Do you?

- I'm that guy squeezing the butter like nine times. It's delicious. Gets all over your hands, though. Alicia Reese from Wedbush as AMC shares continue to pop after hours. Appreciate the analysis there.