AMC Is Coming Back, but That Doesn’t Change its Trajectory

Yes, AMC (NYSE:AMC) continues to rebound in terms of revenues. But that isn’t true of AMC stock. It isn’t rebounding in kind. That shouldn’t be a surprise to investors in any case. 

AMC stock: an AMC imax theater storefront
Source: Sundry Photography / Shutterstock.com

What AMC represents is the same as ever: A leading company in a declining industry. Its share price is indicating that perhaps the market is finally coming to that realization en masse. 

I’ll continue to make the argument that AMC doesn’t make any sense right now, nor has it for some time. Let’s look at the fundamental argument that makes that as true as it has ever been. 

Earnings Results

When AMC released earnings on Mar. 1, Chief Executive Officer (CEO) Adam Aron called out the skeptics, stating: “They were wrong. They were wrong. They were wrong.” He was referring to earlier reports that anticipated net losses as high as $194.8 million in the quarter. AMC actually ended up reporting $134.4 million net loss in Q4. 

However, AMC bears were not wrong, they were not wrong, they were not wrong. That is evidenced by the fact that share prices have dropped following the earnings release. Because really, the truth remains that AMC operates a leading chain of movie theaters that loses lots of money. 

Losses for AMC Stock

Bullish AMC pundits will point to the fact that AMC is doing much better now than it has been recently. And that’s not an incorrect assertion. 

The company recorded $2.53 billion in revenues in 2021, up from $1.242 billion in 2020. And it lost a relatively modest $1.269 billion throughout 2021. That isn’t really a modest loss by most any standard. But given that AMC reported a net loss of $4.589 billion in 2020, it is. 

What AMC pundits want investors to believe is that we are returning to a pre-pandemic world. However, this pre-pandemic world isn’t that which existed in early 2020 or even any time in 2019. 

The bulls want investors to believe that AMC in 2022 can be the AMC it was in 2018. 

Harkening Back

That’s because in 2018, AMC managed to eke out a $110.1 million net gain on $5.46 billion of revenue. In 2019, AMC lost $149.1 million on a very similar amount of overall revenue. 

Yes, AMC has stanched the bleeding to a degree. It lost upwards of one billion dollars in Q4 of 2020. That figure decreased to a $134.4 million net loss in Q4 ‘21. But is that appealing?

It’s hard to find an argument that implies that a $134.4 million net loss within a quarter is indicative of a massive ongoing turnaround. However, that’s pretty much the take you’ll get if you follow certain r/WallStreetBets narratives. 

CEO Adam Aron also states:

‘The fourth quarter of 2021 proved once again that moviegoers want to see movies in theatres. […] We are quite bullish that for the full calendar year of 2022 the industry box office could be nearly double that of 2021, with COVID impacts easing, with more and more major films on the docket for release, and with most major studios coalescing around an exclusive theatrical window of 45 days or more.'”

But if 2022 is anything like the period prior to the pandemic, then AMC isn’t a strong bet. 

What to do With AMC Stock

I’ve written about AMC a bunch of times. I always come back to the same conclusion, which is that AMC really doesn’t make much investment sense. Consumers aren’t going to movies in the numbers they once were. It remains an interesting footnote within a very noteworthy investing period. 

AMC is the largest movie theater chain globally. It has the most to lose. The company’s stock received an interesting reception during the pandemic. But that wasn’t bound to last forever. Losses are losses, and that was AMC’s forte entering, during, and likely after the pandemic. AMC’s fan base doesn’t appreciate that truth, but that doesn’t make it any less true.

On the date of publication, Alex Sirois 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.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks.Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.


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