What happened
Shares of AMC Entertainment (AMC 9.56%) were gaining on a broader rally in movie theater stocks today after the first coronavirus vaccine was given in the U.K. this morning. The news stoked optimism for hard-hit "recovery stocks" like those in the entertainment sector. AMC, as the world's biggest movie theater chain, figures to benefit from the end of the pandemic thanks to vaccine distribution over the coming months.
As of 12:45 p.m. EST, AMC stock was up 11.2%, while peer Cinemark Holdings had gained 7.2% at the same time.
Image source: AMC Entertainment.
So what
Margaret Keenan, a 90-year-old British woman, became the first person in the world to receive a SARS-CoV-2 vaccine, this one produced by Pfizer and BioNTech. The inoculation comes just a month after the drugmakers announced strong phase 3 results for the vaccine with a 95% efficacy rate, and today's news shows that regulators are able to quickly go from positive results to approval. Full distribution, however, will still take a few months as high-risk individuals are set to get the vaccine first.
AMC is desperate to see the pandemic come to an end, and the stock skyrocketed as much as 78% when Pfizer announced the results last month. Still, AMC faces significant headwinds after warning in October that it could run out of cash by the end of the year or early next year, and it recently proposed selling an additional 200 million shares to help it stay afloat, which will significantly dilute current shareholders.
Now what
AMC stock is likely to respond favorably to any news that raises hopes for the end of the pandemic. Though the company has reopened most of its theaters in the U.S., they are operating at limited capacity and studios have been reluctant to release movies in theaters given the poor attendance.
Investors should tread lightly with the entertainment stock. Beyond the pandemic-related concerns and the shareholder dilution, the shift to streaming services will further squeeze theaters. Warner Bros. already said that it would release its 2021 slate of movies simultaneously on HBO Max and in theaters, a bad sign for the future of the multiplex.
