Adam Aron, the CEO of global movie-theater chain AMC Entertainment (NYSE:AMC), is a great cheerleader for the company. However, even Aron had to acknowledge a problem that impacted AMC Entertainment’s financial figures this year.
As the company continues to bear the weight of massive debt, it’s wise to avoid AMC stock in 2024.
It’s understandable if meme-stock traders are looking for one more huge rally. Yet, prospective AMC Entertainment investors should look at the big picture.
Frankly, the risk-to-reward balance isn’t favorable and AMC Entertainment shares are very likely to lose value in the coming months.
Aron’s Admission/Excuse
When AMC Entertainment published its preliminary first-quarter 2024 results, Aron offered up an admission — or maybe, we should call it an excuse.
Aron acknowledged, “As predicted, the box office in the first quarter was adversely impacted by the 2023 Hollywood writers and actors strikes.”
It’s as if Aron was bracing Wall Street for poor preliminary results. AMC Entertainment’s revenue declined slightly from $954.4 million in the year-earlier quarter to $951.4 million in Q1 of 2024.
More alarmingly, AMC Entertainment reported an adjusted EBITDA loss of 31.6 million in 2024’s first quarter. For comparison, the company recorded positive adjusted EBITDA of $7.1 million in the year-earlier quarter.
Unsurprisingly, AMC Entertainment lost money in Q1 2024 — 163.5 million, to be specific.
AMC Entertainment’s ‘Debt Sentence’
Meme-stock mania is all fine and well, until people start betting their hard-earned capital on a truly troubled company. In the case of AMC Entertainment, the company’s “debt sentence” (as I like to call it) is a major disaster signal.
Here are a couple of stats to ponder before you go fishing for meme stocks. AMC Entertainment had a $624.2 million cash-and-cash-equivalents position as of March 31.
According to Bloomberg, the company owed “about $4.5 billion in long-term debt” as of Dec. 31, 2023.
Moreover, over $2.8 billion of that debt has maturity dates coming in 2026. Some of AMC Entertainment’s lenders might offer extensions, but there’s no guarantee that this will happen or that the terms will be favorable to AMC Entertainment.
With all of this in mind, it seems inevitable that the company will issue many more stock shares in order to pay down its debt load.
AMC Stock: Simply Avoid This Troublemaker
Aron knows how to get people enthused about AMC Entertainment, and there’s nothing wrong with that. However, now is not the time to have meme-dream fantasies.
Instead, look closely at AMC Entertainment’s financial problems before making any investment decisions.
People might call AMC stock a meme stock, but I just call it a troublemaker stock. As always, don’t focus on the rewards before considering the risks.
Ask yourself: What could go wrong? A lot can go wrong for AMC Entertainment’s investors this year, so just stay away and check back some other day.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.