There is no question AMC Entertainment (NYSE:AMC) is languishing. The movie theater operator lost 86% of its value over the past year punctuated by brief rallies when meme stocks came to life.
Although AMC stock has been declining for years, it may be Disney (NYSE:DIS) that showed how it can survive. The movie studio has a big hit on its hands. The animated movie Inside Out 2 has already taken in over $1 billion at the box office since it was released less than a month ago. It is the first billion-dollar movie since Barbie stormed the theaters last summer.
If Disney can produce more family-friendly fare like this, AMC Entertainment could be a thriving company again.
The Death of the Blockbuster Movie
The sparseness of blockbuster movies is what ails AMC stock. It may be hard to believe, but last year only two movies crossed the $1 billion threshold. Barbie and The Super Mario Bros. Movie were the only films to achieve that status, according to BoxOfficeMojo. Another movie, Oppenheimer, came close at $975 million worldwide and there were a few that made more than $500 million, but none were especially noteworthy.
In 2022, there were only one or two more than that. For an industry that used to produce 10 or more billion-dollar hits a year, the dearth of big winners shows why the industry and AMC are failing.
People aren’t going to the cinema anymore. Even though ticket prices are the same as last year, box office totals are down over 20% year to date. There has been little reason to go.
Certainly, streaming video has eaten away at a large portion of attendance. And more entertainment choices are available to people who used to go to the theater. However, a lot of the blame can be laid at Disney’s doorstep.
The Not So Magical Kingdom
Disney turned from box office gold into lead. Where it once reliably produced smash hits one after another, the studio is now a desert. It’s almost as if it forgot how to entertain people. In fact, that is the reason.
Star Wars, Marvel superheroes and animated classics were cinema staples. There are 26 Disney movies that made $1 billion or more at the box office. Between 2015 and 2019, it released 19 of them. Three made over $2 billion. Excluding the pandemic year of 2020, there hasn’t been a single one since that made that kind of money until Inside Out 2.
Disney lost its magic touch. Much of that results from the entertainment stock embracing the culture wars.
Certainly, superhero fatigue and streaming video contribute to the malaise. Yet critics say the movie studio (and the industry as a whole) consciously changed how it made movies. Instead of making movies for entertainment, they now come with a message and push an agenda. This has also led to a decline in quality writing, CGI, and overall filmmaking.
Disney also abandoned much of what made its animated films beloved for generations. Instead of producing new animated classics, it chooses to make live-action remakes of its classics that turn people off. The result is empty movie theaters for AMC.
Inside Out 2, however, shows the potential for a comeback. People will go to the movies if they are given good films to watch. And it doesn’t have to be cartoons, superheroes or space fantasy. Oppenheimer proved adults will come out for well-crafted fare, too.
A Path Forward
The success of Disney’s latest animated hit should signal to Disney how it should make movies going forward. Whether it takes the hint is another question. How it proceeds will play a big role in whether AMC Entertainment thrives.
AMC revenue declined to $951 million in the first quarter, and it produced another loss of $163.5 million. It last produced profits in the second and third quarters of 2023 after the surprise success of the “Barbenheimer” twin movie.
If Disney and Hollywood return to making these kinds of films, AMC stock won’t need to rely on meme stock traders to keep it afloat. Until that happens consistently, investors should avoid AMC stock at all costs.
On the date of publication, Rich Duprey 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
