Justin (00:00): So, in this video, I'm going to give you a detailed breakdown of the AMC stock, and I'm also going to provide you with both my analysis and a 12-month price prediction on the AMC stock. So, if you don't know, AMC Entertainment is an American movie theatre chain that's been hard hit the last few months by the pandemic, and in a turn of fate, it's been raised from the dead by a subreddit called Wall Street's Bet. Now, I'm not going to go into too much detail on this. Still, since there is a massive amount of trading volume and flurry of activity around the stock, I wanted to quickly jump in and give you some solid deep, fundamental analysis. Before we continue, please do me a huge favour and hit the like button below this video now. This helps me rank these videos on YouTube, and every single like really does help me. So please, please click on that Like button now.
(00:50): So, with the crazy activity going on around the AMC stock and GameStop, and a few others, I wanted to quickly jump in and give some fundamental understanding behind the stock and really try and unlock and see if there was any’s any intrinsic value in the company. So, the stock is currently trading at about 13 bucks. And we do know that the company has a market cap of 4.49 billion. We also know by looking at the stats that there is a P.E. ratio of over 300. 356 To be precise, which is just completely insane. That means that the price is, at this moment in time, entirely sentiment driven. Having said that, this shouldn't be the only reason you stay clear of the stock or buy the stock, and so it is important to have a look at some of the fundamentals. So, one of the things I like to do is jump into the actual statistics behind the stock and uncover anything there that we are missing. So obviously, one of the first things I like to look at is the profit margin. Now, we are always ideally looking for companies with a profit margin, at least 10% or higher, the profit margin here minus 144 that is, that is a big red flag. On top of that, we're going to have a look at the dividend yield, we can see there's absolutely no dividend on the stock, and then we're going to jump in on over to the balance sheet under financials and just quickly see if there is any equity or any value in the company.
(02:20): So if we currently look at total assets 13 675 liabilities 2461, leaving equity of 1214, there is a bit of equity in the company. Surprisingly enough, their assets are more significant than their liabilities, considering that the pandemic so hard hits them. Considering the industry that these guys are in, this is a difficult space for them. So, if we go ahead and then look at the cashflows, and just have a look, and look at the last three consecutive years, we can see that basically, the previous trading year was an absolute nightmare. Put them in the red, complete negative figures, operating cash flow down, you know, pretty much everything on this, on the cash flow statement is just looking horrible for the last year. Go and have a look at the income statement. We can see total revenue down, cost of revenue, we can see there's a big problem in their gross profit margins. We can also see if we go and look at their shares under the balance sheet that actually, there has been an increase in the number of shares issued and that for me is often a huge red flag. It's a red card for me. One of the things that troubles me is when I don't see companies doing share buybacks. When I don't see the number of shares reducing, the company doesn't have confidence in itself. So, there's a lot of red flags here.
(03:45): So, I want to quickly jump into my 12-point spreadsheet, which I use to evaluate shares and give you the kind of feel for where we are at on this and maybe bring some sanity to the discussion around the AMC stock. So first of all, we usually look for companies with a P.E. ratio lower than 25. We are sitting in 350, plus P.E. ratio. That's insane. This stock is absolutely sentiment-driven at the moment. It doesn't have a profit margin of greater than 10%. It’s down in the dumps—it’s negative figures for the last trading year. Assets are greater than liabilities. That’s one positive. If we have a look at total revenue, down, gross profit down, operating income down, net income down, cash from operating activities down, and free cash flow growth, which would be the difference between cash flow from operating activities and total capital expenditure, that is also down. Number of shares outstanding has been going up for the last three years. That's a big problem. And if we're going to look at the cost of the dividend, because there is no dividend, we do say that it has met the criteria on this checklist, but purely on the basis that there is no cost of dividend. And then, the other thing that's interesting about the share price is, I typically look for shares that have doubled in value over the last decade. This has actually more than halved.
(05:06): So, if I have to give my honest summation on this, if I was buying this stock based on fundamental value, it's an absolute dog, I wouldn't go near it. But things are stranger than they seem in reality, so many retail investors are trying to stick it to the hedge funds in a turn of events. They're really trying to say that as retail investors, if we all band together, we can, in some way, control the market. And whilst the idea and the notion is somewhat romantic, we have to remember that it comes back to fundamentals. The stock market is not a casino, and things like AMC and GameStop prove that yes, you can gain the system if you get a large amount of money and a large amount of people and a large amount of capital together. You organise this. And in fairness, this is what big business, this is what institutions, this is what the hedge funds have been doing for ages. And this is the first time in recorded history that retail investors have banded together, found a voice under the subreddit Wall Street bets, and have really decided to stick it to the man. So, you know, if you're into speculation and speculation is your kind of thing, and then absolutely go and speculate on the stock. If you've got the guts for it, and you're prepared to go in there, and you're prepared to lose your money, you could make a lot of money, but I believe that this company's worth nothing long term. It is a shell. It has no fundamental value, and it is pure speculation.
(06:40): So, if you're going to jump into the stock, my advice is, go in with your eyes wide open and know that this is no different than sitting at the roulette table in a casino. So, I hope that brings about some sanity to the discussion. I hope that when you look at shares, you look at buying shares, you look at valuing shares. If you are a long-term value investor, then AMC shouldn't even be on your list if you are in there for speculation. If you are a day trader if you're looking for an opportunity, perhaps, AMC is your share.
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