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Why AMC Entertainment Holdings Stock Was Down Today, Before Recovering

By Jon Quast - Updated Jun 29, 2020 at 12:26PM

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Some see risk to the stock, and with movies getting delayed again, they may have a point.

What happened

Shares of AMC Entertainment Holdings (AMC 8.03%) fell hard in early trading on Monday because financial services company Credit Suisse downgraded the stock and sees significant downside due to the ongoing COVID-19 pandemic. As of 11:45 a.m. EDT today, the stock was up just under 1%, but it had been down 10% earlier in the session.

It's a continuation of a painful journey for AMC shareholders. Over the last three years, shares have lost more than 80% of their value, severely underperforming the market during that time.

AMC Chart

AMC data by YCharts.

So what

AMC has around 600 movie theaters in the U.S., all of which are closed because of the coronavirus. That's obviously been devastating for revenue. But the company is slated to reopen 450 locations on July 15, and the remaining theaters shortly thereafter.

COVID-19 closed movie theaters, so moving past that event should be a good thing. But Credit Suisse is looking at rising coronavirus cases in the U.S. as reason to be concerned. The risk is twofold. First, the coronavirus could spark fresh physical-distancing restrictions, and nonessential businesses (like movie theaters) could close. And second, if studios fear low attendance at theaters, movie releases may get delayed.

For its part, AMC was pushing to reopen before the release of what would be two blockbuster films under normal circumstances. Disney's Mulan was slated to drop July 24, while AT&T's WarnerMedia was set to release its film Tenet on July 31.

Now what

The releases for Mulan and Tenet have been delayed again, now to August. Therefore, Credit Suisse's point is well taken. It does appear the risk to movie theater stocks is rising. No business can indefinitely operate without income.

Without a clear end in sight for the coronavirus, investors should consider the risk to any business that depends on consumers getting out and about to spend discretionary income

Jon Quast 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.
$23.96 (8.03%) $1.78
The Walt Disney Company Stock Quote
The Walt Disney Company
$109.11 (2.33%) $2.48
AT&T Inc. Stock Quote
AT&T Inc.
$18.00 (-1.91%) $0.35

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