AMC (NYSE:AMC) has been on the roll courtesy of the superhero-led success it has had of late. It recently recorded its third-best weekend of the pandemic with the release of “The Batman.” Hence, the money is rolling again for the theater giant, but AMC stock continues to be in a free-fall. Though things are improving, AMC is still on shaky ground.
The pandemic ravaged the theater business, with lockdown restrictions across the globe. However, theaters are now open at full capacity, but foot traffic still lags pre-pandemic levels. The past couple of months have been highly encouraging, though, for the company with the release of two blockbuster superhero flicks.
Despite its recent success, it’s going to take a lot for AMC to strike a chord with long-term investors.
AMC Stock: Superheroes to the Rescue
AMC ended last year with a bang, reporting a colossal bump in revenues from 2020. $1.17 billion in sales was a massive improvement from the $162.5 million it made during the same quarter last year. Moviegoers are becoming more comfortable returning to theaters, and the trend has benefitted AMC immensely.
The release of the latest “Spider-Man” flick was perhaps solely responsible for the incredible showing during the fourth quarter. Having earned over $1.85 billion at the box office, the film has become the third highest-grossing film in cinema history. AMC’s management credited pent-up demand and a strong advertising campaign for the film’s massive success.
Furthermore, the management did well in capitalizing on the pent-up demand by raising ticket prices. Average ticket prices in the U.S. were up to $11.50 in the fourth quarter, up 15.5% from the prior-year period. Similarly, the food and beverage spending also increased by double digits in the last quarter.
The momentum hasn’t stopped, though. The recent release of “The Batman” resulted in the third-best weekend the theater chain has had in the past couple of years. Before that, “Uncharted’s” release resulted in massive growth numbers in February from the prior-year period.
Considering the recent success of the three blockbusters discussed earlier, studios might want to reassess their stance on streaming services. Film studios are focusing on their streaming platforms and seem to be disregarding the theater experience for their users.
Balance Sheet Woes
With such an incredible showing during the fourth quarter, AMC’s investors will have been curious about its balance sheet positioning. The company could generate a healthy positive cash flow of $8 million. Moreover, most of its financial metrics improved substantially from 2020. Despite that, the company’s net liabilities improved by just $546 million in 2021 from last year.
AMC is still seeking shareholder approval from last year to raise its share count. Consequently, its working capital growth has stalled. Additionally, it announced a massive debt refinancing transaction. The company will be offering new debt to push back maturities effectively and pay back some of its old debt. Nevertheless, it comes at a major cost to AMC, as was detailed by its management in its fourth-quarter filing. To extinguish the higher-rate debt, the management will have to record over $100 million in losses.
Final Word on AMC Stock
AMC has posted some impressive results of late on the back of a strong film slate. However, the strong results haven’t done much to control the bleeding.
Its net debt is still enormous, and it will take a lot more “Spider-Man” films to steer it out of the financial rut it finds itself in at this time.
Therefore, its best to avoid investing in AMC stock at this time.
On the date of publication, Muslim 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.
