(Bloomberg) -- Almost three years removed from its meme-stock heights, AMC Entertainment Holdings Inc. shares are skirting record lows, adding to the scrutiny of the movie-theater chain’s recovery plans as it reports earnings this week.

The stock is down 27% to start 2024, after touching an all-time low in February. The company and its peers — including Cinemark Holdings Inc. and Imax Corp. — are struggling with sinking US box-office revenue after last year’s strike by Hollywood actors and writers delayed the rollout of films, short-circuiting the industry’s Barbenheimer-assisted rebound from the pandemic.

Junk-rated AMC is also saddled with billions of dollars of debt. It took on some for 2016 acquisitions, and B. Riley analyst Eric Wold says it added more during the pandemic, with a major chunk coming due in 2026.

“If we can get to a nice snap-back in box office in 2025 and maybe an earlier look into 2026 that things are looking up as well, given what the film slate would look like at that time, they have a much better chance of addressing that debt in 2025 or 2026,” Wold said.

It’s all ratcheting up the focus on the company’s earnings announcement on Feb. 28 after the market close. Investors will gauge its efforts to squeeze more revenue out of its theaters, and also the prospect of improved ticket sales over the course of 2024, which brings releases including sequels to Dune and Deadpool. There are higher hopes for next year, when films such as potential blockbuster sequels to Mission Impossible and Avatar are expected to hit theaters.

Read more: Studios, Theaters Face Shrinking 2024 Box Office Due to Strikes

An AMC spokesperson declined to comment. In a Feb. 15 post on X, Chief Executive Officer Adam Aron said he’d “have much to say” on this week’s earnings call.

Debt Load

S&P Global Ratings grades the company CCC+, deep into junk, with a negative outlook, reflecting “its substantial debt burden” and expectations that revenue will fall 8% to 9% this year. 

AMC has taken steps to reduce its debt, which S&P early last month said tallied about $4.65 billion after accounting for recent debt swaps. Last year, it raised cash through selling shares, which bolstered its balance sheet but also raised concern among investors because of the dilutive effect.

The company will likely issue more shares to service debt and prepare for growing debt repayments, Wedbush analysts wrote in a note last week. They expect AMC will try to renegotiate debt terms before maturities balloon in 2026.

“AMC has probably the most stretched balance sheet” among peers, said Macquarie analyst Chad Beynon. “They were able to raise a decent amount of capital in the back half of 2023, so they have the cash, but they diluted shareholders massively in 2023, and we think that’s a major reason why the stock has underperformed in the past six months.” 

B. Riley’s Wold sees upside for AMC shares in the long-term, with a Street-high 12-month target of $12, more than double the average for analysts tracked by Bloomberg. 

Wold says his forecast is based on its pre-pandemic performance and expectations for newer segments, including a home popcorn line and distribution rights for concert films like it had with Taylor Swift and Beyoncé.

Still, box-office revenue is unlikely to recapture 2019 levels for some time, according to Macquarie’s Beynon, because there have been more films going to streaming services instead of theaters. 

“People kind of learned in this day and age of streaming, unless something is really a must-see, like a Barbenheimer or something that’s getting a lot of traction online, you can just wait to watch it at home,” said Kevin Near, an analyst with Bloomberg Intelligence.

©2024 Bloomberg L.P.