The stock market has been exceptionally volatile since the beginning of the year. Stretched equity valuations, concerns about the Fed’s aggressive interest rate hikes, historic 40-year high inflation, rising oil prices, and a prolonged Russia-Ukraine conflict are contributing factors to the heightened market volatility. The CBOE Volatility Index has jumped 21.8% year-to-date, and macroeconomic uncertainties pushed the market into bear earlier in the year.
Despite the recent spike in equity markets, shares of companies with deteriorating fundamentals and bleak growth prospects are expected to remain under pressure. Such companies have weak financials and a history of huge losses.
Given these factors, Wall Street analysts expect ultra-popular stocks AMC Entertainment Holdings, Inc. (AMC), Avis Budget Group, Inc. (CAR), and GameStop Corp. (GME) to plunge in price the coming months, given their weak financials.
AMC Entertainment Holdings, Inc. (AMC)
AMC in Leawood, Kans., is a leading theatrical exhibition company. It owns, operates, and has interests in theaters located in the United States and Europe. AMC operates in two segments: U.S. markets; and international markets. The company operates more than 950 theaters and 10,600 screens in the U.S. and international markets.
On February 14, AMC completed a private offering of $950 million in 7.5% senior secured notes due 2029. The note offering is expected to increase AMC’s debt and interest burden.
In its fiscal 2021 fourth quarter, ended Dec. 31, 2021, AMC's operating costs and expenses increased 8.7% year-over-year to $1.23 billion. The company’s operating loss and net loss amounted to $60.40 million and $134.40 million, respectively. And its adjusted loss per share amounted to $0.11 for the fourth quarter.
Analysts expect AMC's loss per share to total $0.47 for its fiscal year 2022 first quarter, ended March 31, 2022.
The shares of AMC have decreased 9.4% in price year-to-date and closed yesterday's trading session at $24.64.
Among the five Wall Street analysts that rated AMC, two rated it Sell, while three rated it Hold. The 12-month median price target of $9.83 indicates a 60.1% downside. The price targets range from a low of 6.00 to a high of $16.00.
Avis Budget Group, Inc. (CAR)
CAR provides car and truck rentals, car sharing, and ancillary products and services to consumers and businesses. The Parsippany, N.J., company operates the Avis brand, which offers vehicle rental and mobility solutions to commercial and leisure segments, and the Budget Truck brand, which provides truck and cargo van rentals to consumers and the light commercial sector. CAR also offers insurance products and coverage, supplemental liability, and cargo insurance products.
CAR's total expenses increased 36% year-over-year to $2.03 billion in its fiscal 2021 fourth quarter, ended Dec. 31, 2021. For its fiscal year 2021, ended Dec. 31, 2021, the company's cash and cash equivalents declined 22.8% year-over-year to $534 million. CAR’s net cash used in investing activities amounted to $6.31 billion.
CAR closed yesterday’s trading session at $263.30.
Among the six Wall Street analysts that rated CAR, two rated it Sell, while four rated it Hold. The 12-month median price target of $195.00 indicates a 26% downside. The price targets range from a low of 164.00 to a high of $260.00.
GameStop Corp. (GME)
GME offers games and entertainment products through its e-commerce platforms and various stores in the United States, Canada, Australia, and Europe. The Grapevine, Tex.-based company markets and sells new and used gaming platforms, accessories, new and used gaming software, in-game digital currency, and full-game downloads. GME operates more than 4,573 stores and e-commerce sites.
Last November, GME established a new five-year, $500 million global asset-based revolving credit facility with a syndicate of banks. This new ABL facility replaced the company’s existing $420 million facility, which was due in November 2022. The new ABL credit facility might increase the company’s liabilities.
In its fiscal year 2021 fourth quarter, ended Jan. 29, 2022, GME's cost of sales increased 12.1% year-over-year to $1.88 billion. The company’s loss from continuing operations before income taxes grew 1,682.1% year-over-year to $167.70 million. GME’s net loss and loss per share came in at $147.50 million and $1.94, respectively, registering an increase of 283.2% and 263% from the same period last year.
The negative $1.45 consensus EPS estimate for its fiscal year 2022 first quarter, ending April 30, 2022, represents a 222.2% decline from the same period in 2021. It is no surprise that GME has missed consensus EPS estimates in three of the trailing four quarters.
The stock declined 13% in price over the past year. GME closed yesterday's trading session at $166.58.
Among the two Wall Street analysts that rated GME, one rated it Sell while one rated it Hold. The 12-month median price target of $65.00 indicates a 61% downside. The price targets range from a low of $30.00 to a high of $100.00.
AMC shares were trading at $23.18 per share on Friday afternoon, down $1.46 (-5.93%). Year-to-date, AMC has declined -14.78%, versus a -4.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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