What happened
The stock market was having a rough day on Wednesday, with all three major averages down by nearly 3% as of 11 a.m. EDT. However, AMC Entertainment Holdings (AMC 8.23%) was performing even worse, with its shares lower by 7% for the day.
So what
There isn't any company-specific news fueling this move. Rather, it's the overall market headwinds. But it's why the market is falling that is likely hitting AMC especially hard.
Image source: Getty Images.
Simply put, as long as the COVID-19 pandemic drags on, movie studios will be hesitant to release their most promising films. And to put it mildly, the virus case numbers are heading in the wrong direction. The U.S. reported 73,240 new coronavirus cases on Tuesday, and the seven-day average of new cases is higher than it's ever been. Numbers like this decrease the likelihood that the movie industry will get back to normal anytime soon.
Now what
AMC has taken investors on a roller coaster ride recently. Its theaters are reopening, but there simply aren't any notable movies hitting theaters. The movie industry is quite literally a business without a product to sell right now, making it one of the worst-hit industries. Retail stocks, on the other hand, despite having been affected by the pandemic, at least have products on the shelves to sell as they reopen.
Sure, AMC is doing a decent job of getting creative, such as renting out its theaters for private screenings, but the current level of business isn't even in the same ballpark as theater-filling blockbusters.
The million-dollar question AMC needs to answer for investors is whether the movie business (and therefore the profitability of movie theaters) will return before the company has exhausted its financial resources. And it's fair to expect volatile moves like today's to continue until more clarity on that situation is available.
