Yesterday, InvestorPlace contributor Dana Blankenhorn posed an important question regarding AMC Entertainment (NYSE:AMC): Is Taylor Swift about to save AMC stock?
Earlier this month, the struggling theater chain turned heads when it announced that it would be showing a film version of the singer’s highly popular Eras tour. This certainly comes along at a good time, as the Hollywood strikes continue to threaten the film and television industry.
But even an entertainer as iconic and in-demand as Swift can’t save a stock as troubled as AMC. After the company announced this news, shares failed to garner any significant momentum and remain firmly in the red.
Does this mean there’s no real hope left for this struggling theater chain? It certainly looks that way.
Let’s dive deeper into the problems facing AMC and assess what they mean for investors. When working with Taylor Swift doesn’t help an entertainment company, it’s time to see the writing on the wall.
Roll the Credits on AMC Stock
Blankenhorn’s question is a fair one, especially given Swift’s power not just as an entertainer but as a driver of economic growth. Demand for tickets to Swift’s Eras tour reached staggering levels in 2022, but the following year brought new information.
The Federal Reserve admitted that Swift’s concerts had boosted the U.S. economy by helping generate growth for the hospitality and tourism sectors. According to market research firm QuestionPro, the tour could have added as much as $5 billion to the global economy. It’s certainly not unrealistic to think that helping bring these concerts to a wider audience could help AMC stock.
It’s entirely possible that the theater chain will see a bump on Oct. 13 when the Taylor Swift: The Eras Tour will begin showings at AMC Theaters. But as always, investors should be careful to see the bigger picture when it comes to a struggling meme stock like AMC. Superficial hype does not constitute actual growth, and AMC stock hasn’t seen any actual growth in months.
As of this writing, it is down more than 82% for the past two quarters. The movie theater industry took a massive hit during the Covid-19 pandemic, but more importantly, consumer sentiment toward the cinema experience has shifted. As InvestorPlace contributor Chris MacDonald reports:
“For many moviegoers, it’s simply a much better experience to stream a movie for free (or even buy it for $10-$20), avoid the price tag associated with popcorn and tickets, and also avoid having someone kick your seat or shine their phone throughout the entire movie.”
On top of all that, every Hail Mary pass that AMC has thrown has gone nowhere. Its recent plan to convert AMC Preferred Equity Units (APE) into stock sent shares into a tailspin. It still hasn’t recovered. On top of that, retail investors may be betting on a short squeeze, but while they waited, short sellers made $522 million betting against AMC stock last month.
The Bottom Line
As Oct. 13 approaches, the r/WallStreetBets crowd will continue their battle cries, telling everyone to keep holding AMC. These retail investors have proven that they can’t be swayed, no matter what.
But no matter what social media chatter claims, the bottom line is this: Taylor Swift can’t save AMC stock. Because no one can. The company has an outdated business model that it refuses to abandon, even as the times continue to change.
AMC may be taking measures to reduce its debt, but that still doesn’t make the stock a buy. Expect a bump around Oct. 13, but after that, shares will end up back where they belong.
On the date of publication, Samuel O’Brient 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.
