Is going to the movies really dead? If you’re holding AMC Entertainment (NYSE:AMC) stock, you hope not.

Not according to actor Tom Cruise, whose new film Top Gun: Maverick has people flocking back to theaters to see the sequel to the 1986 classic about military fighter pilots. Through two weeks of release, Top Gun: Maverick has earned nearly $600 million worldwide, including $322 million in the U.S. and Canada, making it the biggest hit of Tom Cruise’s 40-year career. The new Top Gun film builds on other blockbusters that have been released theatrically in recent months, including Spider-Man: No Way Home ($1.9 billion worldwide), The Batman ($770 million), and Doctor Strange in the Multiverse of Madness ($913 million). With other tentpole movies slated for release over the summer months, including Jurassic World Dominion, Minions: The Rise of Gru, and Bullet Train, reports of the cinema’s death look to have been premature.

Return To Form

That people are returning to movie theaters in droves after two years of Covid-19 lockdowns helps to explain why shares of AMC Entertainment have risen 3% in the past month while the S&P 500 index dropped 6% during the same period. In business since the silent movie era of 1920, AMC is today the largest movie theater chain in the world with nearly 8,000 screens in the U.S. alone. AMC is one of the main beneficiaries as people get off their couches and return to seeing movies on the big screen.

Indeed, AMC reported that more than 5 million people saw a movie at one of its theaters during the Memorial Day long weekend that officially kicks off summer at the end of May, compared to 2.6 million people during the same holiday weekend in 2021, when Covid-19 measures restricted capacity or completely shuttered its venues around the world. AMC went so far as to issue a news release where the company publicly thanked Tom Cruise for helping to bring people back to its theaters, stating: “Tom Cruise continues to be one of theatrical exhibition’s greatest allies, and AMC is enormously grateful to him for his tireless and indefatigable efforts to support the cinema.”

Streaming Retreats

At the same time as blockbuster movies seem to be bringing people back to theaters, the outlook for streaming services that were all the rage while people were sheltering in place at home during the pandemic now seems to be wavering. Stocks of companies such as Netflix (NASDAQ:NFLX) and Disney (NYSE:DIS) are each down more than 30% this year on concerns that their growth is slowing on their streaming platforms, and that they are losing subscribers. NFLX stock has fallen 68% YTD following news that it lost 200,000 subscribers over the first three months of the year. The company forecast that it will lose another 2 million subscribers by the end of the current second quarter, rattling investor confidence in the entire sector.

To be sure, AMC is still recovering from the ravages of the pandemic and continues to struggle to get its finances back to pre-pandemic levels. However, indications are that the company’s trending in the right direction. In this year’s first quarter, AMC reported a net loss of $337.4 million, or 65 cents a share. While not great, it was an improvement from the net loss of $567.2 million, or $1.42 a share, in Q1 the year earlier. AMC also reported that it earned $252 million from food and beverage sales in this year’s first quarter, which was a huge improvement from the year earlier period.

AMC’s revenue had fallen to just $1.2 billion for all of 2020, down from $5.5 billion in 2019 before the pandemic. While the company still has a ways to go to reach and surpass its pre-pandemic sales, the numbers from this year’s first quarter, combined with the current attendance numbers, are encouraging. Of course, the elephant in the room is whether AMC can move beyond the meme stock status it achieved last year when retail traders executed a short squeeze on the shares? At this time, it doesn’t look like AMC stock has been caught in a short squeeze since last September when investors pushed the share price above $50.

Keep An Eye On AMC Stock

It’s still early days and AMC will need to string together a few better-than-expected quarterly earnings to convince Wall Street that its theatrical movie business is back on track, and that there remains a future for theatrically released films. But it certainly looks like the worst is over for AMC and that there is light at the end of a tunnel that has been very dark for the past two years. While it might still be too early to take a position in AMC stock, it is certainly advisable to put the company’s ticker symbol on a watchlist and keep an eye on it as the summer blockbuster movie season gets into full swing.