AMC’s stock jumps, but Amazon unlikely to acquire theater chain, analyst says

Citing multiple sources close to the discussions, the Intersect reported that Amazon
AMZN,
-0.82%
is exploring a possible acquisition, although there is no certainty that the retail giant will make an offer.

But Wedbush analyst Alicia Reese thinks that Amazon is unlikely to acquire AMC. “Amazon does not need 10,000 screens to enter the theater business,” she said in a note, adding that Amazon would be better off buying a piece of Cineworld Group Plc.
CINE,
+0.21%,
the U.K.-based movie-theater chain that filed for bankruptcy protection last year.

Related: AMC ‘positioned really well’ for 2023, says Wedbush

“Amazon could buy 1,000 screens for $200,000 a screen, or $200 million,” Reese added. “Why would Amazon instead choose to buy 10,000 screens for $8 billion? The bottom line is that Amazon has no interest in being in the theatrical exhibition space to make money.”

AMC describes itself as the largest movie-theater company in the world, with approximately 950 theaters and 10,500 screens across the globe.

Even if Amazon wanted a place to exhibit its own films, 1,000 screens would be plenty, and 200 would probably be enough, according to Reese. “The ‘going rate’ pre-pandemic was $250,000 per screen,” she wrote. “With the Cineworld bankruptcy, Amazon can probably cherry-pick screens for $200,000 and the creditors will grab an offer like that.”

Additionally, the analyst does not think that AMC is a likely acquisition target in general given its massive $4.6 billion of net debt and inflated valuation.

Also see: AMC shareholders approve ‘APE’ conversion in ‘landslide victory’ but stock tumbles

If AMC is ever acquired, however, Reese thinks that the company’s Imax Corp.
IMAX,
+3.51%
domestic footprint would remain safe. “If any company were to take over AMC (which we think is unlikely), we do not see any negative impact to IMAX (AMC is IMAX’s largest domestic partner), as it is one of AMC’s most valuable assets/relationships, if not the most valuable,” she wrote. Moviegoers continue to trend toward premium large format, Reese added.

Over the past two years, AMC has been on a roller-coaster ride that took it from beleaguered pandemic victim to meme-stock phenomenon. AMC’s stock has risen 26% in 2023, outpacing the S&P 500 index’s
SPX,
-0.16%
3.4% gain.

Last year, AMC took aim at its massive debt burden with the launch of its ‘APE’ special dividend. The AMC Preferred Equity Units
APE,
+4.26%
are up 3.9% this year.