AMC Stock Could Be on the Mend After This Bright Earnings Result

AMC Entertainment (NYSE:AMC) stock got a meme boost, but it may be good on its own merits.

AMC (AMC) stock is displayed on the Robinhood app with the Reddit logo in red in the background.
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The meme stock phenomenon is still a force in the investing world. As soon as people realized what stocks were worth investing in, they started spreading like wildfire.

Social media platforms like Twitter (NYSE:TWTR) or Reddit sported stories with captions such: “I made my millions on Wall Street!”

When stocks like AMD and GameStop (NYSE:GME) surged to new heights at the beginning of this year, many investors were expecting them to go back down.

However, both stocks have maintained their price momentum. AMC stock still has a one-year return of 699.2%. Despite the sharp fall within the last three months, that is a very healthy number.

However, many stocks have been able to sustain themselves at such high valuations, and they’ve done so with the help of financing from current investors.

Whatever your opinion about the recent positive price momentum, one thing is sure: this is possible because these companies have already raised enough money for their needs at present.

It can also enter new business lines, leading to growth with increased shareholder value.

Despite the new initiative’s lack of success, it is still possible to work out if some strategies are executed successfully.

This could lead to better fundamentals and involvement by the Reddit crowd who loves short squeezes, which we saw earlier this year.

Earnings Are a Step in the Right Direction

AMC recorded a net loss of $224.2 million, or 44 cents per share, in comparison to a loss of $905.8 million, or $8.41 per share, in the last quarter.

This quarter’s revenue was $763.2 million, a year-on-year increase of 538.66% from the year-ago figure of $119.5 million. Both EPS and revenue handily beat analyst estimates.

All domestic AMC cinemas are open as of Sept. 30, and 99% of international theaters were able to show movies during the third quarter.

Forty million customers viewed films this summer, up from 22 million in Q2. It is proof that people are looking to venture outside their homes to watch a movie once again.

Much of the credit also goes towards vaccines and blockbuster titles like “Shang-Chi and the Legend of the Ten Rings,” “Black Widow,” and “Free Guy.”

Admission revenue came in at $425.1 million, a substantial uptick from last year’s $62.9 million. The food and beverage also did very well, increasing to $265.2 million from $29.1 million last year.

Most importantly, from a liquidity position, the company is rock solid. It finished with a cash position of $1.8 billion at the end of the latest reporting period. The figure includes cash and undrawn revolving credit lines that will not be needed for the next 12 months.

CEO Adam Aron offered a sobering reflection on the future despite the robust quarter.

“We wish to emphasize that no one should have any illusions that there is not more challenge ahead of us still to be met,” Aron said. “The virus continues to be with us, we need to sell more tickets in future quarters than we did in the most recent quarter, and adjusted EBITDA is still well below pre-pandemic levels.”

Diversifying Revenue Lines

The company has recently launched various initiatives to provide additional growth avenues including getting into the popcorn business.

AMC also plans to launch its coin-based currency. It is already receiving payments from customers in Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD).

When movie theaters are struggling to stay afloat, AMC has announced that it will be giving away 86 thousand non-fungible tokens (NFTs) as an incentive for patrons who purchase tickets through its various platforms for Spider-Man: No Way Home.

“Our AMC Theatres guests and our AMC Entertainment shareholders have been calling for AMC to get into the world of NFTs,” Aron said, “and we couldn’t imagine a perfect way to start doing so than with our good friends at Sony Pictures.”

The company has also upped its content game by showing live sports, promoting artist-driven and curated movie releases.

This bodes well for the long-term profitability of their revenues and occupancy since it results in increased foot traffic.

AMC Stock Is a Better Investment After Earnings

AMC is guiding for positive EBITDA growth in the year’s final quarter. I expect the company to see a new high in revenue once we reach pre-Covid footfalls again.

People are yearning for the cinematic experience once again. Staying at home has only made the heart grow fonder. The major studios have a pretty full content slate, and they have also acknowledged the importance of in-person viewing.

Also, AMC is diversifying its product suite, incorporating several business segments that will result in long-term success.

No matter your view about AMC stock, the impetus given by Reddit will last for a long time. It has raised enough cash to finance its turnaround ambitions.

On the publication date, Faizan Farooque 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.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.


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