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Why AMC Entertainment Stock Went on a Wild Ride Today

By Reuben Gregg Brewer – Oct 27, 2020 at 3:34PM

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AMC Entertainment's stock was up and then down, as investors tried to figure out if good news was really good or not.

What happened

Shares of movie-theater operator AMC Entertainment (AMC 13.19%) started the day off higher by around 5%. Then they slowly started to fall, declining by around 5% at around 12:30 p.m. EDT. Then they headed a little higher again, sitting at a loss of roughly 2% at 3 p.m. EDT. What's with the seesaw?

So what

The good news that drove AMC Entertainment's stock higher at the open was an announcement that the company is getting set to reopen theaters in Northern California. Like New York, which recently reopened theaters, California is a very important movie market.

Theaters located in San Francisco and the greater Bay Area are included in this update. The reopenings will start on Oct. 30, which is this-coming Friday. There's no doubt this is good news that's worthy of a price increase, as it gets AMC Entertainment that much closer to business as usual. But business really isn't anywhere near normal. 

A man and a woman on a seesaw.

Image source: Getty Images.

Indeed, COVID-19 news remains downbeat, with cases on the rise throughout the United States. It's not particularly helpful to open a theater if an uptick in cases leads to government closure of non-essential businesses, again.

Even if that outcome is avoided, there are few desirable movies in the theaters to attract customers. And with many people watching the news of a spike in COVID-19 cases, there's a big question mark around how many customers AMC Entertainment would get, even in a best-case scenario. As investors let the good news sink in, they probably realized that, given the current situation, it really doesn't change much about the company's current headwinds. 

Now what

Only the most aggressive investors should even be looking at AMC Entertainment at this point. It wasn't that long ago that the company warned it might run out of cash before the end of the year or in early 2021.

The company is in a troubling situation, at best. Most long-term investors should stay away, noting that company and industry news will likely keep volatility high for the foreseeable future.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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