Meme stock traders might root AMC Entertainment (NYSE:AMC) stock and its famous CEO, Adam Aron. However, it’s important for sensible investors to look closely at the actual data because there’s no reason to expect it to return to its 2021, 2022 or even 2023 price levels.
Not long ago, AMC Entertainment refinanced $2.45 billion worth of debt. Some onlookers celebrated this, but it doesn’t negate the fact that AMC Entertainment has to pay off a whopping $2.45 billion plus interest.
Actually, it’s probably worse than that, since Bloomberg reported that AMC Entertainment “has been fighting against $4.5 billion of long-term borrowings as theater attendance remains below pre-pandemic levels.”
So, AMC Entertainment’s recently released quarterly results were crucially important – but unfortunately, they don’t suggest that a happy ending is in store.
First, Some (Sort of) Good News
In light of AMC Entertainment’s heavy debt load, the company really needed to hit a home run with its second-quarter 2024 financial report. However, there wasn’t a home run, though there may have been a couple of singles or doubles.
Here’s the rundown for Q2 of 2024. AMC Entertainment’s admissions revenue totaled $564.4 million, falling short of Wall Street’s consensus estimate of $586.6 million. So far, not so good.
Meanwhile, AMC Entertainment’s total quarterly revenue declined 23% year over year to $1.03 billion, which also isn’t good news. But hey, at least this result was in line with Wall Street’s consensus estimate.
AMC Entertainment reported an adjusted earnings loss of 43 cents per share. This result was also in line with the analysts’ consensus forecast.
I suppose that, with some mental gymnastics, one could construe AMC Entertainment’s in-line results as positive news.
AMC Entertainment: Don’t Celebrate the Results
Mental gymnastics aren’t healthy like real gymnastics are. Indeed, they can be really bad for one’s financial health.
Let’s look at AMC Entertainment’s quarterly bottom-line results from another angle. The company reported a net loss of $32.8 million for Q2 2024. In contrast, the company disclosed a $8.6 million profit (not a loss) in the year-earlier quarter.
Thus, on a year-over-year basis, AMC Entertainment’s admissions revenue fell short of Wall Street’s expectations, the company’s sales dropped by 23% and AMC swung to a net loss. The takeaway is that there’s no real cause for celebration here.
Yet, Aron is the ultimate hype man and he’s going to celebrate irrespective of AMC Entertainment’s actual results. For example, as Barron’s reported, Aron “touted the company’s growing cash reserves,” which grew from $624 million in 2024’s first quarter to $770 million in Q2.
That’s all fine and well, but it doesn’t come anywhere near AMC’s aforementioned $4.5 billion worth of long-term borrowings.
AMC Entertainment’s “growing cash reserves” won’t likely grow fast enough to cover the company’s debt, even if there are occasional blockbuster movies to bring in substantial revenue.
AMC Stock: Choose Reality Over Mental Gymnastics
Cherry-picking a handful of somewhat positive-sounding data points is a bad habit. I urge you to avoid the mental gymnastics and face the stark reality of AMC Entertainment’s financial issues.
Maybe there will be another meme-stock revival, but that’s not something you can count on. A much more likely outcome is that AMC Entertainment shares will lose substantial value due to the company’s subpar fundamentals.
With that in mind, investors should prepare for a brutal future with AMC stock. It’s fine to sell your shares as soon as possible to avoid potential losses and heartbreak.
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.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
