For the first time in years, AMC Entertainment (NYSE:AMC) has reported a quarterly profit. This came as a surprise to many, as AMC stock has been highly volatile over the past six months. Nevertheless, the struggling theater chain just surpassed Wall Street expectations, reporting a noteworthy increase in attendance and seeing spending per-guest finally exceed levels prior to the pandemic.
So, AMC actually seems to be making progress and the market is reacting well. The company saw revenue increase by 15.6% to $1.34 billion and attendance rise by more than 12%. Meanwhile, net income came in at $8.6 million, well above the net loss of $121.6 million seen in the second quarter of 2022. The company also reported diluted EPS of 1 cent compared to a diluted loss per share of 12 cents in Q2 2022. AMC saw improvements in non-GAAP operating cash generated and net cash used in operating activities as well.
All of this doesn’t necessarily mean that AMC stock is a good buy. However, it does imply that some of the last remaining sectors of the economy seem to finally be shaking off the effects of the pandemic.
What’s Happening With AMC Stock?
While AMC stock has risen on this positive earnings momentum, it hasn’t been by much. Indeed, shares climbed briefly today but have since run out of steam, now down by less than 1%. So, today’s bump may have been driven more by hype than anything else.
Of course, it’s also not that surprising that AMC reported impressive Q2 earnings. The past month alone has driven many people to the movie theaters with the dual release of two blockbuster films. Between Barbie and Oppenheimer, demand for cinema tickets has spiked. CNN reports that the recent heatwave has also helped drive consumers toward indoor activities, thereby boosting ticket sales as well.
AMC CEO Adam Aron recently tweeted the following:
In only 3 weeks for Barbenheimer, the results so far should take your breath away! Barbie has crossed $1 billion in movie theatre ticket sales worldwide. Oppenheimer crossed a half billion dollars. The “movie theatres are dead”prognosticators are Ducking Wrong! Quack, quack. pic.twitter.com/fKX3FCtjlQ
— Adam Aron (@CEOAdam) August 7, 2023
Prior to the Q2 report, InvestorPlace contributor Bret Kenwell speculated that Barbie mania could lead to AMC stock’s best week ever. While it’s true that the “Barbenheimer” craze has certainly helped boost AMC, its growth hasn’t been steady. Most notably, when the proposed conversion of AMC Preferred Equity Units (NYSE:APE) into AMC was blocked, AMC was cast in a negative light. Now today’s performance serves as a reminder than even its first quarterly profit in years can’t make the stock a good buy.
Why It Matters
With Barbie mania having taken over, it may be easy to assume that theaters and AMC stock are back. But investors should remember that, at its core, AMC is still a meme stock powered mostly by retail investors. On top of that, the possibility of bankruptcy continues to loom, even in the wake of positive earnings. InvestorPlace’s Thomas Yeung describes the company as being in “purgatory”:
“The firm isn’t quite broken enough to go out of business immediately, nor is it healthy enough to succeed. And much like purgatory, there’s little to do but wait around and hope that a “fixer” eventually comes to the rescue.”
As AMC remains in this dangerous state, the r/WallStreetBets crowd will still rally around shares. Ultimately, though, the current glow from Barbie ticket sales will fade and AMC will find itself back near the bottom.
On the date of publication, Samuel O’Brient did not hold (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.
