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Why Shares of AMC Entertainment Are Surging Today

By Rich Duprey - Updated Apr 28, 2020 at 11:14AM

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The theater operator is hoping for the doors to open again for movies.

What happened

The stock of AMC Entertainment (AMC 2.48%) jumped 12.5% higher in morning trading Tuesday as the prospect of more states allowing businesses to open boosted prospects that the movie theater operator would be able to reopen, too.

So what

It was just two weeks ago that it looked as if the COVID-19 pandemic would push AMC into bankruptcy, as forced theater closures shut off revenue to the world's biggest cinema operator. The company also slashed its dividend, and executives all took pay cuts to help conserve cash.

Friends smiling while eating popcorn at theater

Image source: Getty Images.

But AMC was able to raise $500 million in a new debt offering that pushed back the threat of going bankrupt while its largest shareholder, Dalian Wanda Group, maintained it was never a possibility to begin with.

Now what

Investors should still be wary, even if AMC is able to open many of its theaters sooner than the mid-June date it had been eyeing.

The movie industry itself has been seriously hurt by the pandemic, and numerous studios have moved films slated for theatrical release to various streaming sites for people to watch while locked down. While several big films from studios like Disney were simply pulled until the crisis resolves itself, Hollywood is still facing a lost summer when many blockbusters typically air.

Some moviegoers may be better than none, but it still suggests AMC Entertainment is facing a rough year.

 

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short July 2020 $115 calls on Walt Disney. The Motley Fool has a disclosure policy.

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Stocks Mentioned

AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
AMC
$24.81 (2.48%) $0.60
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$124.96 (0.56%) $0.70

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