Please ensure Javascript is enabled for purposes of website accessibility

Why AMC Entertainment Stock Dropped Today

By Jeremy Bowman - Mar 5, 2020 at 1:49PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the movie theater chain continued to fall on worries that the coronavirus will drive Americans away from theaters.

What happened

Shares of AMC Entertainment (AMC -5.54%) were falling again today as the movie theater operator was reeling from fears that moviegoers would stay away due to COVID-19 coronavirus fears. Today's losses come after the producers of the new James Bond film No Time to Die said they would delay the opening of the film from next month to November. 

Movie theater stocks were down broadly on the news and have fallen sharply since the coronavirus outbreak first began to rattle market last week. Today, AMC Entertainment stock was down 11.9% as of 1:14 p.m. EST, while the S&P 500 was down 3.6%.

A movie theater with a blank screen.

Image source: Getty Images.

So what

There was no company-specific news on AMC today, but the spreading impact of the virus poses a clear threat to the world's biggest movie theater chain. Already, movie houses in China and northern Italy have been shuttered, and this morning, California declared a state of emergency after it reported its first death from the coronavirus.

Americans are already starting to react as if an outbreak could take hold across the country, stocking up on essentials from retailers like Costco and canceling travel plans. 

It's unclear if movie theater attendance is down at all, and management remained positive on its earnings call last week, saying that it wasn't expecting massive theater closures from the outbreak. But if studios delay openings, attendance may decline regardless of how moviegoers might feel about the coronavirus.

Now what

AMC is already in a shaky financial position. It was forced to slash its quarterly dividend from $0.20 to just $0.03 last week in order to conserve cash. it has nearly $5 billion in debt on its balance sheet and nearly $300 million in annual interest expense. It had operating income of just $136 million on a GAAP basis last year and free cash flow of $60.9 million, which is not enough to cover those interest payments, nor pay for its previously generous dividend. 

In recent weeks, the company's debt has fallen to $0.80 on the dollar, showing significant doubts about its ability to stay in business and pay its debt. If a coronavirus outbreak keeps Americans at home, AMC could be in serious trouble.


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
$12.78 (-5.54%) $0.75
Costco Wholesale Corporation Stock Quote
Costco Wholesale Corporation
$488.26 (0.52%) $2.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.