AMC Entertainment Holdings (NYSE: $AMC), the iconic theater chain, has experienced a tumultuous journey in recent years, facing highs and lows that reflect the volatile nature of the stock market and the challenges of the entertainment industry amidst ongoing global uncertainties.
AMC’s Rollercoaster Ride: 2024 Stock Turmoil
AMC started 2024 on a bleak note as its stock plummeted to a record low of $4.05 on January 31, marking a 1.5% drop following the Federal Reserve’s first interest rate meeting of 2024. It came after the stock struggled throughout January, declining nearly 34% for the month, while the S&P 500 rose 1.6%.
However, signs of promise surfaced in February as AMC shares bounced back and ended the month with a 6.7% gain. Unfortunately, the sell-off worsened in March despite optimistic comments from AMC’s CEO, Adam Aron. “My good news on this Easter Sunday is that in March, the domestic industry box office finally turned upwards,” Aron said in a tweet. But the stock finished the month down 13.9%.
The company’s struggles have continued into April, with the stock sinking 6.8% on Monday to $2.47, more than 59% below its January 1st price of $6.12. AMC’s market value has shrunk to just $650 million, a far cry from the $14.9 billion valuation it enjoyed a little over a year ago.
The decline has raised bankruptcy concerns about the company’s future. However, CEO Adam Aaron put those fears to rest. During the 2024 CinemaCon in Las Vegas, he said, “I think it’s inconceivable that AMC would have to restructure like Regal Cinemas did and file for Chapter 11.”
Positive Financials Amid Stock Price Struggles
The company’s financial results have shown some bright spots. In the fourth quarter of 2023, AMC reported a net loss of $0.54 per share, a significant improvement from the $1.40 loss in the prior-year quarter. Sales grew 11% to $1.1 billion, marking the fourth consecutive quarter of double-digit increases, although this was a deceleration from the full-year top-line growth of 23%.
Additionally, AMC’s adjusted EBITDA soared 193% to $42.5 million, and the company held $884 million in cash and cash equivalents at the end of the quarter, up from $730 million at the end of Q3.
Diversifying and Expanding
To diversify its offerings, AMC has made several strategic moves. In March, the company introduced Zoom Rooms at AMC in eight major markets, allowing dispersed workforces to conduct hybrid events seamlessly. This collaboration merges Zoom’s platform with AMC Entertainment’s technology, enhancing the theater rental business.
Additionally, on March 11, AMC announced the expansion of its popcorn distribution, responding to high demand. Their ready-to-eat and microwave popcorn varieties are now available at major supermarket chains and online through Amazon. AMC also elected Sonia Jain, the CFO of Cars.com, to its board of directors on March 1st.
These initiatives come as the company looks to capitalize on changing consumer preferences and explore new revenue streams beyond the traditional movie theater business.
Blockbuster Releases and Dilution Woes
Despite positive signs in the industry, AMC Entertainment continues to grapple with significant challenges. The recent success of “Dune: Part Two,” grossing $32.2 million in its opening weekend, offered a glimmer of hope for the entertainment sector. However, as industry analyst Robert Marich noted, the distribution of profits from blockbuster releases disproportionately favors Hollywood distributors, leaving theaters with diminishing returns.
Even with the record-breaking success of Taylor Swift’s concert film, “Taylor Swift: Eras Tour,” which grossed $26 million on opening day and surpassed “Michael Jackson’s This Is It” as the highest-grossing concert documentary ever, AMC’s stock continues its decline, unable to offset broader financial struggles.
Moreover, the conversion of AMC’s preferred equity units, referred to as “APEs,” significantly impacted the company’s common stock. This conversion resulted in considerable dilution, contributing to a 35% decline in share prices on August 14, 2023.
AMC Stock Update
On April 16, AMC Entertainment Holdings experienced a notable surge in its stock, increasing 10.12% to $2.72 from the previous day’s closing price of $2.47. That was the largest single-day gain since February 6, when it rose 10.9%.
The rally continued on Wednesday, with the stock up 10.4% at one point during the morning trading session. At 12:36 PM EDT, the stock was up 6.43% to $2.8950.
Year to date, the stock is down 52.70%, and it has lost 94.67% of its value in the past 52 weeks. The market cap is $717.01 million, and the stock is below its 50 DMA of $4.02 and significantly below its 200 DMA of $13.65. Over the past year, AMC stock peaked at $62.3, while its lowest point was $2.38.
As of March 28, 2024, the stock reported a short interest of 42.19 million shares, reflecting a 16.14% change. Additionally, the percentage of float stands at 16.06%.
Analysts Remain Cautious on AMC’s Outlook
The recent performance of AMC’s stock has prompted some analysts to adjust their outlook. On January 2, B. Riley Securities maintained a neutral rating but lowered its forecast from $15 to $12.
AMC Entertainment’s struggles are not entirely unexpected, given the broader challenges facing the movie theater industry in the post-pandemic era. The company’s stock experienced a meteoric rise during the “meme stock” frenzy of 2021, soaring from just $2 per share to an all-time high of $72.62 on June 2, 2021.
However, 2022 was a brutal year for AMC and other meme stocks, as the company’s share price plunged 85% to end the year at $4.07. In 2023, despite shareholder hopes, AMC’s stock saw an 83% decline to $6.12 by year-end due to significant capitalization changes in August and September.
Should You Invest in AMC?
Despite adversities, AMC’s CEO remains optimistic regarding the company’s future. While the cinema industry shows signs of recovery fueled by sequels and established franchises, the pace of releases remains cautious.
Analysts like Macquarie Research’s Chad Beynon foresee a more promising outlook in the latter half of 2024 and 2025. However, AMC Entertainment and the broader industry still face substantial hurdles, necessitating strategic agility and perseverance.
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