What happened
Shares in AMC Entertainment Holdings (NYSE: AMC) The stock tumbled 6% in early trading this morning on the New York Stock Exchange and lagged 5% through 10:45 a.m. EDT. But why?
I mean, didn’t Citigroup just this morning raise its target price on the cinema chain stock by 35%?
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so what
Well it did. As StreetInsider.com reports today, Citigroup AMC this morning gave a target price increase from $ 3.70 per share to as much as $ 5. The problem is, AMC stock is currently trading closer to $ 35 per share than it is $ 5. And that basically means Citigroup just said that AMC stock is doomed to lose about 85% of its value in the next 12 months.
As the analyst explained, AMC was not only forced to carry a massive debt load of over 11 billion from the analyst’s point of view. In addition, the increase in home video streaming and simultaneous film release in both cinemas and television sets means that “the strategic role of exhibitors is waning,” the analyst warns.
What now
No wonder, then, that Citigroup is maintaining its sales rating for this utterly unrewarding stock. I can’t say that I disagree.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.
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