AMC Entertainment Holdings (NYSE:AMC) has recently reported its fourth-quarter and full-year 2021 results. Investors looking for catalysts that may move its shares should scrutinize these financial results. Year-to-date, AMC stock has losses of 40.8%, but for the past year, it has gains of 99%. With a 52-week range of $8.31 to $72.62, it is obvious that this entertainment company has lost almost all of its momentum and the meme stock status that sent it to its highs.
What will 2022 bring for AMC Entertainment?
First of all, a famous quote from Star Wars comes to mind.
May the Force Be With AMC Stock
Fans of Star Wars can argue that the phrase “may the force be with you” is iconic, used so many times and under many circumstances. I believe AMC Entertainment could borrow it and use the “force” to get back on its feet and deliver a strong financial performance. It needs to make a sustainable turnaround, not just report a strong quarter based on blockbusters.
Spiderman: No Way Home was a big hit, bringing people back to movie theaters. Other movies like The Batman, Top Gun: Maverick, Jurassic World Dominion, Black Panther: Wakanda Forever, and Avatar 2 should be top reasons to bring more revenue in to AMC Entertainment.
But why am I referring to the famous phrase from Star Wars? According to AMC on its fourth-quarter (Q4) 2021 box office numbers, “while they are more than quintuple that of last year, they are nonetheless well short of pre-pandemic numbers.” It also added that spring and summer of 2022 continuing through year end should be a better season.
Strongest Quarterly Results in Two Full Years
My previous articles on AMC Entertainment were not bullish at all. I started with criticizing Chief Executive Officer (CEO) Adam Aron, then argued that the stock meme frenzy is too risky and considered its bottom for the stock price may not be close any time soon. I concluded that “its profitability needs a lot of improvement, and negative equity remains a big red flag.” I felt that investors needed a few more quarters to be convinced about a sustainable financial improvement.
In Q4 2021, AMC Entertainment reported revenue of $1,171.7 million compared to $162.5 million for Q4 2020. Net cash provided by operating activities was $46.5 million versus negative $357.9 million in Q4 2020 and a free cash flow of $8 million versus negative $375.7 million in the same quarter a year ago.
Most importantly, 100% and 95% of its domestic theatres and international theatres, respectively, were open and operating as of Dec. 31, 2021.
For the full-year 2021, operating metrics like attendance and average screens improved a lot, with a 96.1 % surge in U.S. attendance and a lagging 30.3 % in international attendance.
AMC reported that at the end of 2021, it had liquidity availability of over $1.8 billion. In 2021, revenue of $2,527.9 million increased 103.46% and net loss narrowed to negative $1,269.8 million versus a net loss of $4,589.4 million in 2020. Free cash flow of negative $706.5 million in 2021 was also narrowed compared to negative $1,303.3 million in 2020.
The good news is that there is a considerable improvement in key financial metrics. The bad news is that the company is still losing money and burning cash.
CEO says Experts Underestimated AMC Stock
Adam Aron, CEO of AMC, said:
“[Remember] that otherwise highly respected experts were calling for the AMC share price to fall to $2, $1 or even a penny by February or March of 2022. […] I’m looking only retrospectively, but those experts greatly underestimated AMC. With the full benefit of hindsight, we can now happily say because now it’s a simple matter of fact. They were wrong, they were wrong, they were wrong.”
He also added that in 2022 and 2023, AMC wants to transform into something much greater than a movie theater operator.
But hold on a moment. What would this concept be like? We know that AMC is selling its own branded popcorn. It is also focusing on adopting more cryptocurrencies as a means of payment and has taken initiatives, such as non fungible tokens (NFTs). Could AMC also develop its own cryptocurrency?
I consider the idea of accepting cryptocurrency as payment for tickets a horrible idea. I do not yet know how much revenue is coming in via accepting cryptocurrencies for AMC, but the large volatility of the cryptocurrency market can worsen the revenue earned in the case of a crypto selloff in 2022.
What AMC Entertainment needs now is not just a boost in revenue, but a boost in profitability. Cutting losses is great, but making actual profits is the goal. And AMC is still too far from this goal. So, I guess it will need all the “force” with it we can get in 2022.
Investors should wait for a bold vision that will earn sustainable revenue. If this transformation takes too long, then their new quote might be: “that’s all, folks.”
On the date of publication, Stavros Georgiadis, CFA 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.
