Shares of movie theater operator AMC Entertainment Holdings (NYSE:AMC) dropped as much as 11% out of the gate on Monday. There didn't appear to be any material news out of the company, but that didn't stop investors from taking in the bigger picture shaping up in the movie space, and deciding that the outlook is troubling.
The first big headwind for AMC today is that, despite reopening, there doesn't appear to be much desire among U.S. audiences to head to the movies. According to industry watchers, the domestic weekend box office was a meager $13.5 million, which was actually down over 13% from the prior week's tally.
The "blockbuster" Tenet appears to have pulled in just $36 million or so domestically at this point, with foreign ticket sales making up the vast bulk of its total $250 million in ticket revenue. It reportedly cost over $200 million to make, so this is hardly a successful move at this point when you factor in other costs, like advertising.
Basically, the reopening isn't going particularly well for AMC. And every new weekend without a big box-office tally, even when big-name movies are playing, just highlights the hard work ahead.
The second big problem that came to light over the weekend is what appears to be an uptick in coronavirus cases in Europe. The United Kingdom is, notably, considering another lockdown. If this is a harbinger for other countries, such as the United States, then AMC's efforts to get moviegoers back in their seats will be even more difficult.
Complicating that could be moviemakers further delaying the big films that might draw crowds, or canceling showings altogether like Disney chose to do with Mulan. All in, it's not the least bit surprising that investors were in a negative mood as the new week got underway.
With a heavy debt load, AMC is not in a particularly good position to weather a prolonged industry downturn. As such, positive and negative news can lead to dramatic price swings. The news this weekend wasn't great, and investors reacted accordingly. While it's hard to tell what happens from here, long-term investors can be assured of one thing: Volatility is likely to remain high. This is not a stock for the fainthearted.