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Stock Markets Lose Momentum; AMC Lights Up, Dave & Buster's Plays On

By Dan Caplinger – Updated Oct 19, 2020 at 12:06PM

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A quick rise at the open gave way to worries about the future.

The stock market lost its upward momentum on Monday morning, giving up early gains and leaving most market benchmarks nearly unchanged. Attention is returning to the coronavirus pandemic, with a huge spike in case counts throughout Europe and the U.S. making many market participants leery of the potential impact of renewed restrictions. Shortly before 11 a.m. EDT today, the Dow Jones Industrial Average (^DJI -0.38%) was down 34 points to 28,573. The S&P 500 (^GSPC -1.03%) had dropped 6 points to 3,478, and the Nasdaq Composite (^IXIC -1.59%) had fallen 33 points to 11,638.

Even amid the downbeat mood, there were a couple of rays of sunshine. AMC Entertainment Holdings (AMC) has been among the hardest-hit companies amid the pandemic, but it hopes to reopen some of its operations in an effort to get things moving back toward normal. Meanwhile, Dave & Buster's (PLAY 0.56%) got some vital financing that should help with its own efforts to beat back the harm of the coronavirus crisis.

The show goes on at AMC

Shares of AMC soared 22% on Monday morning. The movie theater operator hopes that it will be able to continue moving back toward restoring full operations in the coming days.

An audience wearing 3-D glasses staring forward, with a projector light visible in background.

Image source: Getty Images.

The move came after Gov. Andrew Cuomo (D-N.Y.) announced over the weekend that movie theaters in his state will be allowed to reopen on Friday. That will be the first time since mid-March that movies have been shown in public theaters in that state.

But investors shouldn't get too excited. Capacities will be limited to 25% to start out, with a maximum of 50 people per screen. Moreover, theaters in New York City won't be part of the reopening. And if counties see their coronavirus positive test rates rise above 2% or have cluster areas, then theaters could close again.

It also remains to be seen whether moviegoers will want to congregate at cinemas, especially with restrictions. Mask mandates could limit concession demand, and Hollywood has held back some big releases in hopes of getting bigger audiences later. That's a big reason that despite the news, AMC shares still fetch only about half what they did as recently as early September.

More debt for Dave & Buster's

Elsewhere, shares of Dave & Buster's Entertainment were higher by nearly 10%. The company obtained some much-needed financing, and investors are happy about it despite the costs.

Dave & Buster's is aiming to offer five-year senior secured notes in an effort to raise $500 million. The private offering will go toward refinancing its term loan and revolving credit facilities, freeing up more potential liquidity.

The sports bar and entertainment chain also negotiated amendments to extend its revolving credit facility by two years and loosen up some covenants tied to the debt. That's good news for the company, but it also serves as a reminder to investors of the challenges that Dave & Buster's faces right now.

Coronavirus-related closures resulted in Dave & Buster's seeing revenue plunge 85% in the second quarter of 2020. Even with most locations reopened, the chain still has plenty of challenges. Having some extra flexibility from a cash standpoint will be helpful, but shareholders need to watch Dave & Buster's closely to make sure it's taking the right steps to ensure long-term success.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Dave & Busters Entertainment. The Motley Fool has a disclosure policy.

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