Does AMC Entertainment Stock Deserve a Second Act?

  • AMC Entertainment (AMC) is looking to prove it's more than a meme stock.
  • Record-breaking box-office performance shows concerns about the death of movie theaters have been greatly exaggerated.
  • Investors should assess their risk tolerance when considering a position in AMC stock.
AMC movie theater front glowing in the setting sun with the name shining bright red. AMC stock.
Source: Ian Dewar Photography / Shutterstock

For some folks on Wall Street, AMC Entertainment (NYSE:AMC) will only ever be a meme stock. Yet, the global movie theater chain is working hard to demonstrate its resilience. And two years after Covid-19 wreaked havoc on the economy, the markets and AMC’s business, there’s reason for loyal AMC shareholders to be hopeful.

The company is sticking it to critics with record-breaking box office performance. This has been due in no small part to the release of a film that’s both fresh and familiar: “Top Gun: Maverick.”

On its opening weekend, more than 3.3 million moviegoers watched the blockbuster film at an AMC theater. This smashed a 15-year-old record for the best domestic box office performance of any Memorial Day weekend. In total, more than 5 million people around the world went to an AMC theater over the holiday weekend, roughly double the number of people who turned out on the same weekend in 2021. So much for the death of movie theaters.

AMC stock is down more than 50% so far in 2022. But there could be a huge success story in the making here and big gains for investors who can stomach the volatility.

AMC AMC Entertainment $13.38

A Closer Look at AMC Stock

There’s no denying that AMC stock is prone to bouts of volatility, so it’s not appropriate for every portfolio. Be sure to assess your tolerance for risk before trading this stock.

A little over a year ago, the meme-stock phenomenon was in full effect. Some Reddit users apparently targeted AMC stock for a massive short squeeze, and the share price surged to an all-time high of $72.62. Fast-forward to mid-2022, and AMC stock is trading more than 80% below that level.

Another short squeeze is certainly possible. Earlier this month, MarketWatch’s Joseph Adinolfi noted that short sellers’ bets against AMC stock had risen to the highest level in a year at around 22% of the stock’s float. Since then, short interest in AMC stock has come down a little, yet it remains high at 21.3%.

But beyond the potential for another short-squeeze rally, the company’s financials are improving.

Box Office Strength Translates Into Improving Results

During the first quarter, AMC Entertainment saw revenue surge 430% year over year to $785.7 million. And its net loss shrank to $337.4 million from $567.2 million a year ago.

This marked “AMC’s strongest first quarter in two full years,” CEO Adam Aron said in a statement. He credited this to the success of popular films like “Spiderman: No Way Home,” “The Batman,” Sonic the Hedgehog 2,” and “Dr. Strange in the Multiverse of Madness.”

The second quarter has seen its own hits, including the aforementioned “Top Gun: Maverick,” as well as “Jurassic World: Dominion.”

The combination of these blockbuster releases made June 9-12 the second busiest weekend of 2022 for the movie theater chain, which saw global attendance hit 4.9 million. Aron hailed “another important milestone” for the company, as admission revenue exceeded the same weekend in 2019 (or before the world had ever heard of the coronavirus) by more than 15%.

With box office numbers showing signs of recovery, analysts are expecting the company to deliver revenue growth of 165% year over year to $1.2 billion for the second quarter. And for the full year, they anticipate revenue will jump 74% to $4.4 billion.

Meanwhile, the company’s losses are expected to narrow to 18 cents per share for the current quarter, from 71 cents per share a year ago. For the full year, analysts are forecasting a loss of $1.12 per share compared with a loss of $2.66 per share in 2021.

The Bottom Line on AMC Stock

With the help “Top Gun: Maverick” and “Jurassic World: Dominion,” AMC Entertainment saw a weekend of pre-pandemic admissions revenue. Of course, this doesn’t mean the company’s problems are all in the rear-view mirror. It does, however, indicate that AMC Entertainment can thrive if the conditions are right.

Holding AMC stock with confidence doesn’t require a belief in memes. Rather, it’s all about the hope of a recovery when the odds are stacked against a company. But heck, if the “Top Gun” sequel was this successful, maybe AMC Entertainment deserves a second act as well.

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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


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