As Covid-19 cases across the nation have risen and fallen in extreme waves, so have the stocks of in-person entertainment venues. AMC Entertainment (NYSE:AMC) knows this to be true. The nation-wide movie theater chain has seen its AMC stock share price rise from roughly $6 per share in September 2020 to more than $47 as of this writing, a gain of roughly 640% for the year despite a continuously grim industry outlook.
What Will a Downgrade Mean for AMC Stock?
As the trend of blockbuster films being released through at-home streaming services such as HBO Max and Disney+ has picked up, though, investors have raised many questions as to what it will ultimately mean for the box office industry. These questions are particularly relevant as the rise of the delta variant continues to cast economic uncertainty over the media landscape.
September, normally the worst month for stocks, started off with a blow for AMC stock. Chad Beynon, a senior analyst for Macquarie Group, downgraded AMC and predicted a decline to $6 per share, citing negative theater admission trends and inflationary pressures as a reason why the entire industry was heading for a fall. As he told Yahoo Finance’s Myles Udland:
“We’re seeing at malls, theme parks, casinos, travel, so many sectors are back to pre-pandemic levels and the fact that admission revenues in the United States are still 50% of what they were. Now, I understand kids aren’t vaccinated, so a lot of those G and PG movies aren’t seeing much attendance. But still, for a good movie with PG-13 or R-rated, we’re just not seeing the demand that we were seeing before.”
A Marvel of a Hit
Since Beynon’s statements, though, AMC has had at least some cause to celebrate. Marvel Cinematic’s Shang-Chi and the Legend of the Ten Rings enjoyed an impressive opening weekend, grossing an estimated $146.2 million worldwide. As a result, AMC stock began this week on a high note, trading up 6% at the time of writing.
The popularity of the Marvel franchise and the dedication of its fan base should not be underestimated. At least for now, investors who still hold AMC stock can relax.
How Far Will it Fall?
Beynon is correct in his statements regarding the in-person entertainment industry landscape, particularly as the pandemic shows no immediate signs of slowly down and the delta variant continues to pose threats to children.
While declines in the short term are likely, it seems unlikely that shares will fall as far as Beynon predicts. It should be noted that although one film is not enough to keep a company in the green, the coming months will mean the releases of two other highly anticipated Marvel films, Spider-Man: No Way Home and Dr. Strange in the Multiverse of Madness.
As long as fans are able to see these films on the big screen, they are likely to go in groups, resulting in further ticket sales. Investors should brace for some declines in AMC stock but likely not by as much as Beynon predicts.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
