AMC Entertainment (NYSE:AMC) stock did not end the year on a great note. It has consistently dipped in the last four months after starting the year with a bang courtesy of r/WallStreetBets.
Alongside GameStop (NYSE:GME), AMC stock is one of the original meme plays. There are now several meme stocks competing for attention. However, AMC remains one of the most talked-about stocks on the platform. And no one can afford to take the apes lightly after the year we just had.
Despite the sluggish performance in the last few months, the stock is up an astounding 1,095% in the last year. That kind of performance is mindboggling. Especially when you consider the leading multiplex operator started the year with the risk of bankruptcy, it was profitable just one time in the last five years.
Additionally, the near-term future of AMC seems bleak, with revenue expected to decline 25% in the fourth-quarter compared to last year’s corresponding quarter, which could convince investors that the good times are over.
But AMC continues to be a highly mentioned stock on r/WallStreetBets. That gives it a lot of currency among retail traders. These newbie investors started their trading journeys with the stimulus checks they received, and then they never stopped. They have demonstrated that they are a force on Wall Street throughout the year. So, take them lightly at your peril.
The chances are bright that AMC will snap its losing streak and regain lost ground in the new year. Meme stocks are highly news-sensitive. Companies understand this. Hence, AMC management tailors its strategy to make sure it keeps Redditors happy. So, keep your position in AMC at this point, considering the year ahead.
Movie Theatre Trends Are Bullish
The box office is still trying to return to pre-pandemic times. Revenues fell 77.3% to $1.2 billion in 2020, down from its 2019 high of $5.5 billion. With movie theatres shut down and same-day releases of theatrical movies on streaming platforms, revenues were bound to suffer.
However, cinemas are seeing an increase of customers due to fanfare surrounding popular blockbusters such as ‘Venom: Let There Be Carnage’ or James Bond’s latest outing; this trend will only continue following screenings of popular blockbusters like ‘The Batman’, ‘Doctor Strange in the Multiverse of Madness’, ‘Uncharted’, to name a few.
With the recent development in technology, it is possible to enjoy watching films at home. This new trend affects box office revenue over time as people shift their entertainment interests from going out to cinemas to watching the same movie online. However, you cannot replace the cinematic experience.
For example, the Spiderman franchise is one of the most successful movie series. The newest film in this long-running saga opened across America with 1.1 million people seeing it on opening night at AMC Theatres locations — setting a new opening night for all time. Previously, ‘Avengers: Endgame,’ which opened in 2019, held the record.
In 2021, Warner Bros. released films in movie theaters and on HBO Max’s streaming service on the same day. However, CEO Jason Kilar, in a Vox podcast “Recode Media with Peter Kafka,” said the strategy is changing. “I think it’s very fair to say that a big, you know, let’s say a big DC movie, … it’s very fair to say that that would go exclusively to theaters first and then go to somewhere like an HBO Max after it’s in theaters,” he told the interviewer. Many studios are coming out with a similar announcement.
Gen Z and Millennial Investor-Friendly Strategies
It’s no surprise that AMC’s movie theater chain is all in on cryptocurrency and blockchain. They’ve featured crypto logos for their films, and giving away NFTs (non-fungible tokens) with movie tickets. It is also pushing into mall retail by installing popcorn kiosks at your local shopping center.
This past year has been an eye-opening experience for many millennials. As the pandemic took its toll on society, it also served as a harsh reminder that financial security can be fleeting. They’re not going to let their money sit in some retirement fund or savings account collecting dust — they want all aspects of investing taken into consideration with every decision made about where you invest your cash.
However, one also needs to understand that millennials and Gen Z investors conduct their business a bit differently. They have an affinity for all things technology. AMC with its latest initiatives is catering to this attitude. Management is also receptive to the ideas and concerns of its Reddit fanbase. However, its fair to highlight certain risks to the overall thesis before moving forward.
Since ‘Spider-Man: No Way Home’ opened two weekends ago, audiences have plummetted 68%. This is a huge sequential drop for a well-received blockbuster that has been getting rave reviews from critics and fans alike. Many tent pole releases are coming out in 2022. However, if we see similar sequential drops, theater owners such as AMC will continue to suffer profitability issues.
Additionally, theater owners should start to prepare for the worst as ticket sales sputter and consumers steer clear of theaters with this potent fifth surge in Covid-19 cases. Studios may begin pulling releases again, so theater chains need to keep on their toes. Pent up demand will not count for much if this new variant spirals out of control.
AMC Stock Is Primed for a Comeback
Reddit investing is one of the more fascinating trends to emerge from 2021. Newbie investors receiving stimulus checks shifted their attention to the stock markets and completely upended them. Their effect is not waning. Hence, you cannot afford to take this area lightly.
A group of dedicated Reddit and Discord investors has been orchestrating short squeezes on ailing companies throughout the year. The most prominent examples are GameStop and AMC. They are also responsible for some of the most successful trades in recent memory.
AMC mentions on Reddit are still high. Considering the importance of this stock to Reddit investors, expect AMC to snap its losing streak in the next few months. There is pent-up demand for the in-theatre experience, as was seen from the lines for ‘Spider-Man: No Way Home’ and other tentpole films in the second half of the year. The next year has a slew of great movies lined up tailored for the theatre experience.
Combining this with a Gen Z investor-friendly strategy gives you a bright outlook for shares to do well among a sea of meme stocks. That does not mean AMC stock is trading on the strength of fundamentals. However, that is not the point when discussing meme stocks.
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. You can check out his analysis on InvestorPlace and TipRanks.
