Company Outline

AMC stock (AMC:NYSE) takes the top spot as the largest movie theatre company in the US, Europe, and worldwide. The company has 950 theatres spread across the globe with 10,500 screens.

The company was started by Maurice, Edward, and Barney Dubinsky with the purchase of regent Theatre in Kansas City, MO. in 1920. Throughout the decades the company acquired various theatre chains and was finally listed on the New York Stock Exchange in 2013.

AMC has employed various features over the years to its business to implement innovation within the movie theatre experience. More recently the company has introduced power-reclining seats, enhanced food and beverages selection, and a customer loyalty program. 

Past performance

Up until 2017, the stock price for AMC remained within a wide price range that went from $19.50 to $35.80. At the end of July 2017, the price for AMC pierced the lower price range of $19.50 for the first time. A bear trend started and took the share price of AMC stock to an all-time low of $1.91 by the beginning of January 2021.

As we can see from the chart below, even before the restrictions due to the pandemic kicked in, AMC stock price had been in a freefall. But something changed drastically and during the second week of 2021, a new bull trend took control of AMC stock price.

AMC weekly chart
Source: YahooFinance

The theatre company had been targeted by short-sellers, mostly hedge funds. With this news in mind AMC stock began to be the target of millennial investors. Who through various social platforms share everything in their lives including their trading and investing.

Spectacular Rise of AMC Stock

From the beginning of January 2021, through June 2021, AMC’s stock price went from its all-time low of $1.91 to an all-time high of $64.96. This surge is equal to an increase of a staggering 3,301% during little more than 6 months.

The reason why is that the stock became what is known as a meme stock. The terminology meme (pronounced meem) comes from social media, where the digitally connected share pictures with a caption that should produce at least a smile.

The word has been used to describe bullish runs on stocks that were the short-selling targets of funds. This has happened with various stocks, possibly the most famous was GameStop. The buying frenzy for this stock happened around the same time as for AMC.

The thing about selling stocks is that there is no limit to how much you can lose. When you buy stocks, your losses are limited to the principal amount. While stocks have no limit, in theory, as to how high they can go. This phenomenon creates short squeezes when the market continues buying the stock sending its price into a rally multiplying its initial price.

Higher than Expected Preliminary Results

More recently AMC saw a much greater result in the preliminary earnings report issued on February 1, 2022. Shortly after the release, the company’s share price spiked from $16.71 to a high of $18.71, for an increase of 11.97%. 

AMC hourly chart earnings report
Source: YahooFinance

Prospects for The Sector

Cinema operating companies have had a tough time over the past several years as online streaming services have eaten into their earnings. The coronavirus pandemic added more woes to their profit generation. IBIS World reports that the industry lost 60.5% of its revenue in 2020.

However, the future for the movie theatre industry might not be as bleak as it has been in recent years. Producers are gearing up for spectacular high-cost productions that are experienced better on a big screen. To mention a couple of recent examples; Spiderman: No Way Home and Venom: Let There Be Carnage.

The Spiderman film, despite the Covid scenario, cashed in $253 million in America alone over its first weekend. It managed to sell $120 million on its first day alone. The Venom film also managed high numbers, earning $90 million on its first weekend.  

People around the globe are also seeing their disposable income increase and with it the desire to spend on leisure experiences such as movie theatres. Higher disposable income can also be expected to lead the drive for premium seats. More and more theatre companies are offering larger screens and a more immersive experience. Thanks to these extra features companies can probably raise ticket prices.

AMC Stock Outlook

The short-selling of AMC stock that hedge funds put on their books was due to the sensation that the company was going bankrupt. However, in January 2021, the management managed to seal funding for $917 million. $506 Million of this financing was in equity, while the remaining $411 million was raised in debt.

As was presumed at the time, that amount of money was going to be enough for the theatre company to weather its way through the pandemic. As we enter 2022, we can see a host of countries around the world beginning to ease restrictions due to the coronavirus.

Countries are going back to normality, and so too will people get back to their routines. Opening up the economy and people no longer fearing entering closed places is part of AMC’s future. It looks like the ease of access, and attendance numbers will continue to increase during 2022. 

We can add to that the continuing quality of blockbuster releases that the film industry continues to make. 2022 will see the release at the box office of a wide array of movies, many of which are expected to be blockbusters. To name a few; The Batman, Thor: Love & Thunder, Spiderman: Across the Spider-Verse.

Sector Diversification

It’s of fundamental importance to diversify your investment portfolio by investing in several asset types. However, diversification is also a tool to use in a stock portfolio. Spreading your stock investment across stocks of various sectors and market capitalizations. 

If you already hold a number of stocks in different sectors, AMC stock can help further diversify your portfolio. AMC stock captures the exposure to the entertainment industry and the revenues it may produce. The theatre company is receiving a lot of attention lately. A bit like the BNKU stock, which we spoke about recently. This stock is an ETF that invests in the 10 largest American banks. 

Future Performance Prediction

Future performance depends greatly on how quickly society gets back to normality. The company has plenty of cash and earnings have been rising. As we have seen above, the last preliminary earnings beat expectations in a big way.

I would say the company has a lot of potential going forward as we clear up the Covid restrictions. This factor alone will bring back a lot of people to movie theatres. Then we have a film industry that is continuously improving the quality of its films. And AMC is very capable of adding extra value to the theatre goer’s experience. 

Deciding if a stock is a good choice for your portfolio, whether it’s a long or short-term investment can be a tricky business. Several well-established companies can help you make a well-informed decision. You can read more about them in our Investment Newsletters Review.

 

Gino D'Alessio

Gino D'Alessio is a Broker/Dealer with over twenty years experience in various OTC markets such as Bonds, FX and Derivatives. Currently a Financial Markets and Investments Writer & Analyst

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