Analyst Meghan Durkin said in a note to investors that AMC's recent selloff presents an attractive entry point.
Durkin said the stock has come down 43% since the Leawood, Kansas, company held its April analyst meeting. Factors in the drop include disappointing second-quarter box-office receipts, adoption of the new lease accounting standard ASC 842, which "was an estimated $130 million headwind that was not in 2019 street estimates until May," and AMC's new subscription loyalty plan, A-List, which has hampered results for the past four quarters.
The selloff "creates an opportunity for investors, given improving industry box office and AMC's price increases will benefit results in second-half 2019 and beyond," Durkin wrote.
Durkin said AMC's fundamentals should improve in the second half, "led by the strong film slate, which should drive attendance as improved ticket prices kick in."
"Our bottom-up film forecast suggests industry box-office growth for the next three quarters, which ... should bolster investor sentiment as AMC's ticket prices begin to normalize," Durkin wrote.
Durkin said the box office should grow, due to such strong tentpole films as The Lion King, Fast & Furious Presents: Hobbs & Shaw, and It: Chapter 2.
In May, AMC saw its shares drop after the company missed Wall Street's first-quarter earnings forecasts.