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Why AMC Entertainment Is Tumbling After Earlier 25% Gains

By Rich Duprey – May 1, 2020 at 11:49AM

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The movie theater operator's recent strong showing may have been premature.

What happened

AMC Entertainment (AMC -7.43%) is in the process of giving back all of the gains it achieved this week as shares are down 10% heading into midday trading on Friday. 

The movie theater operator rallied from its lows on the prospects of portions of the economy being allowed to reopen, but investors may be having second thoughts.

Woman hiding her face at theater

Image source: Getty Images.

So what

AMC, which operates nearly 1,000 theaters globally and over 600 in the U.S., was only a few weeks ago looking like it was heading toward bankruptcy, though it was able to raise $500 million and forestall the possibility.

Investors were also cheered by the hard stance it took with Comcast (CMCSA -2.34%), saying it wouldn't show any Universal Studios movies after the studio said it would develop a dual-track business model that released movies to theaters and video-on-demand simultaneously.

Now reality may be setting in.

Now what

Even if AMC reopens theaters right away -- which it's not, it's expecting to do so in June at the earliest -- there are few movies available for release as many films were released to streaming services during the lockdown. That means its battle with Comcast may not be a winning one as it will need movies to show in its theaters, regardless of their source.

Also, people may not want to rush back into a theater right away while the coronavirus has not been fully contained, suggesting there may be further downside to this stock.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.

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Stocks Mentioned

AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
AMC
$7.10 (-7.43%) $0.57
Comcast Corporation Stock Quote
Comcast Corporation
CMCSA
$30.43 (-2.34%) $0.73

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