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AMC Entertainment Holdings Inc (NYSE:AMC) is reportedly in the crosshairs of Amazon.com Inc (NASDAQ:AMZN), as the e-commerce giant has long-coveted a theater chain to bolster the prestige of its movies.
According to one analyst, it's looking at the wrong company.
"Amazon does not need 10,000 screens to enter the theater business," Wedbush analyst Alicia Reese says. In fact, Amazon "would be better off buying a piece of Cineworld," she added.
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Recall how Cineworld (OTC:CNNWQ), the U.K. parent company of Regal, went bankrupt in September 2022.
Amazon could probably acquire each of Cineworld's theaters for only $200,000, Wedbush argues.
That's 1,000 screens for $200 million, total.
"Why would Amazon instead choose to buy 10,000 screens for $8 billion?" Reese asks. "The bottom line is that Amazon has no interest in being in the theatrical exhibition space to make money. Strategically, they may want a place to exhibit their own films, but 1,000 screens is plenty, and 200 is probably enough."
Amazon founder and former CEO Jeff Bezos recently told investment advisors to look into a potential acquisition of AMC. If the company owns theaters, it can showcase Prime movies and other Amazon services.
If Seattle-based Amazon were to ink a deal with Cineworld, it would certainly hurt AMC, whose CEO, Adam Aron, recently stressed the importance of raising cash and reducing debt for the company’s survival. The Leawood, Kansas-based company burned through $830 million in cash in 2022 and posted a negative free cash flow of $105 million in the fourth quarter.
AMC Price Action: AMC shares dipped 3.41% Wednesday afternoon at the time of writing to $4.96, according to Benzinga Pro.
Next: AMC CEO Is In Touch With NYSE, FNRA About Stock Staying In 'Threshold List' For 'Failure-To-Deliver'
