What happened

Shares of AMC Entertainment Holdings (AMC 0.77%), the world's biggest movie theater operator, were falling on Tuesday as skepticism about the industry's comeback rose after Tenet, the first predicted blockbuster released in theaters since the pandemic started, disappointed at the box office. At the same time, the decision by Disney (DIS 0.55%) to skirt theaters by releasing Mulan direct to consumers for $30 on Disney+ seemed justified after downloads for the streaming app jumped 68% from the week before.

As of 10:38 a.m. EDT today, AMC stock was trading down 6.2%.

The exterior of an AMC multiplex.

An AMC multiplex. Image source: AMC Entertainment.

So what

Tenet, a Christopher Nolan-directed spy thriller with a production budget of about $200 million, brought in just $20 million in box office sales in its opening weekend, which was extended to include the Labor Day holiday. While that was similar to analyst expectations and comes with movie theaters in New York, Los Angeles, and other cities open at limited capacity, it still shows that demand to go to the movies appears to be below pre-pandemic levels. And it means that Tenet, produced by AT&T-owned Warner Bros., may not be profitable. The film has played well internationally, however, having brought in $126 million after several weeks in theaters.

By contrast, Disney's release of Mulan directly to Disney+ drove a spike in sign-ups for the app, indicating strong demand for the live-action remake of the animated hit, even at $30 a pop. Apptopia estimated that Disney+ was downloaded 674,000 times globally and 400,000 in the U.S. over the weekend, but it's unclear how many subscribers paid for Mulan. Disney stock was up 3% in late-morning trading today.

Now what

Those two data points offer only hints for the future of movie theaters, but AMC seems unlikely to make a full comeback while the virus is active. Meanwhile, pressure from movie studios to go directly to consumers presents a long-term threat to the company. 

There's little doubt that AMC is in a worse position than it was at the beginning of the year as its domestic theaters were shut down for more than five months. Business will be slow as long as the pandemic is active, it eliminated its high-yield dividend, and it has taken on hundreds of millions in high-interest debt. Yet the stock is down just 9% year to date, essentially the loss from today's pullback. That looks like a mistake, and one that could squeeze AMC shareholders as high expectations seemed baked into that price.