Is global movie-theater chain AMC Entertainment (NYSE:AMC) an aging empire with major cracks in its foundation, or the potential comeback story of the decade? This is the billion-dollar question, and how you choose to trade AMC stock depends on how you view the company’s future.
It was a highly uncertain future just a couple of years ago — no doubt about it. As the Covid-19 pandemic took hold in the U.S., lockdowns forced people out of movie theaters and the industry was in deep trouble.
Then came the era of the meme-stock trade in early 2021. It was a wild time as Reddit users pumped up the AMC stock price and loyal shareholders, known informally as “apes,” held their positions with “diamond hands.”
The meme trade came and went, and today’s sensible investors are left to figure out whether the streaming revolution has killed off the movie-theater market. At least one CEO, however, remains defiant against the streamers and the disbelievers — and he’s got a slew of fiscal data points to back up his braggadocio, it seems.
A Closer Look at AMC Stock
Here’s the thing about AMC stock that tends to go unnoticed. Even prior to the onset of Covid-19 — since late 2016, to be precise — the stock price was already declining.
It’s not difficult to pinpoint the reason. Content streaming gained in popularity, and made it tempting to just stay home and watch movies instead of venturing out to theaters.
Covid-19 only exacerbated the problem, of course. By late 2020, AMC stock was barely above $2.
Then came the Reddit rescue team. Through a concerted effort, the “apes” propelled the stock up to a short-term high of $20.36 in January 2021, and then to an all-time high of $72.62 in June.
It was a fun ride, I’m sure, but it wasn’t destined to last forever. AMC stock collapsed to $27 by the end of 2021, and then to $15 and change in early March of 2022.
Spider-Man Saves the Day
Today, it’s probably not a great strategy to wait for the meme-stock traders to pump up the share price again. Instead, it makes more sense to focus on the fundamentals and financials — which, actually, aren’t all that bad.
As it turns out, people are, in fact, still willing to watch movies in theaters. As evidence of this, “Spider-Man: No Way Home” recently became the third-highest grossing movie of all time.
The receipts from that film undoubtedly helped AMC achieve its impressive fourth-quarter 2021 results. This quarter, in fact, was the company’s “strongest quarterly results in two full years.”
Admittedly, AMC posted a quarterly net earnings loss of $134.4 million. However, this is a vast improvement over the prior-year quarter’s net loss of $946 million.
A Load of What?
Besides, AMC reported revenue of $1.17 billion for 2021’s fourth quarter, and that’s much better than the $162.5 million from the year-earlier period.
With numbers like those, it’s understandable if AMC Entertainment CEO Adam Aron engaged in a little bit of braggadocio.
Well, maybe it’s more than a little bit. During AMC’s recent earnings call, Aron took a stance which could politely be described as assertive.
“There are so much conventional wisdom floating around that movie theaters cannot co-exist and cannot thrive in a world of streaming,” the CEO stated. Aron is probably right about that, but what he said next might be considered controversial.
“What a load of like cow dung. There, that cleans that up nicely. What a load of cow dung,” Aron said.
We might be able to forgive the CEO for his indelicate phrasing. AMC’s Q4 2021 attendance level of 59.7 million demonstrated a huge improvement over the roughly eight million from the year-earlier quarter. So, the gist of what Aron is saying is valid.
The Bottom Line on AMC Stock
AMC’s CEO might not be the king of tact. Can we overlook his lack of decorum?
As an investor, the facts should inform your decisions. And, the facts show that AMC is narrowing its net earnings loss.
Besides, the company is generating robust revenues. Just as importantly, AMC is demonstrating that people are willing to go out and watch movies in theaters.
The company’s financial results aren’t perfect, but they’re getting better. Therefore, we don’t have to be concerned about the CEO’s harsh tone. AMC stock can still be a great investment in the ongoing recovery of the movie-theater market.
On the date of publication, David Moadel 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.
