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3 Hard-Hit Companies Doing Brilliant Things in Their Darkest Hour

By Rick Munarriz - Dec 10, 2020 at 8:05AM

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AMC Entertainment, American Airlines, and Carnival are trading at least 40% lower in 2020, but they're doing smart things to help their not-so-smart stocks this year.

This has been a bad year for investors in AMC Entertainment ( AMC 8.13% ), American Airlines ( AAL 0.78% ), and Carnival ( CCL 0.82% ). Folks just aren't going to movie theaters or booking flights these days, and they don't really have a choice when it comes to cruising. 

The market was celebrating all-time highs earlier this week, but the same can't be said about AMC, American Airlines, and Carnival. Those stocks were down 46%, 40%, and 55%, respectively, this year through Wednesday's close. It's been a rough 2020, but let's identify some smart moves that each of these three out-of-favor companies is doing at a time when many investors are writing them off. 

A woman looking surprised by what she's seeing on her smartphone.

Image source: Getty Images.

AMC Entertainment

It's not easy being a multiplex operator these days. Folks are still hesitant to spend a couple of hours in an indoor movie theater with popcorn-chomping strangers, and movie studios have responded by pulling major releases. AMC's biggest rival, Regal Cinema, closed down two months ago, looking to reopen when the coast is clear for its rusting digital projectors next year. 

AMC did the right thing by staying open. If it would've joined Regal in shutting down, the industry would've been toast. The multiplex wasn't going to come back from a second and prolonged shutdown, and even if the chains did reopen, we would be back to where are now, with studios once again pushing out upcoming releases even deeper into the future. AMC is taking one for the team right now, but it's essential for survival. 

Staying open isn't the brilliant thing that AMC is doing, even if it is the right call to keep the industry from permanently caving in to the streaming revolution. The neat thing that AMC is doing is offering private rentals. For as little as $99 for older films and as much as $349 for new releases, someone can rent an entire screen and invite as many as 20 guests. 

Some will argue that a theater would lose money renting an entire screen for $99, but they probably haven't been to the movies lately. I've now gone to my local AMC four times, and just once was there enough people to possibly top $99 in ticket sales. More importantly, filling a theater with family and friends makes it safer. Folks will be more likely to buy snacks and other concessions. More importantly, it could rekindle the love of cinema for a lot of people that wouldn't think of going to a movie theater in a pandemic. 

An American Airlines tail of a Super 80.

Image source: American Airlines Group.

American Airlines

Operating an airline isn't easy, even if American Airlines and its peers have never had a prolonged shutdown the way movie theaters and cruise line operators have endured. But this is still a scary industry. Corporate and leisure travel have taken big hits, and there's no telling when passengers will return. American Airlines revealed last week that its cash burn rate is coming in at the high end of its earlier forecast. 

American Airlines isn't usually the smartest player in the room. It's certainly not a passenger or investor favorite among airline stocks. However, it did make headlines earlier this week by introducing a $129 at-home COVID-19 test kit for passengers that they could take as a way to avoid quarantine restrictions in states that still have them in place for arriving travelers.  

This may not sound so brilliant, and you're right. American Airlines makes the cut here for an even niftier under-the-radar move. This month it prompted members of its frequent flyer program to check the app for a holiday gift. Guests are being rewarded with bonus miles, 500-mile upgrades for elite status members, and day passes for its Admirals Club airport lounges. Getting folks to re-engage with an app is smart, and this clever promo comes with a clock in some cases. The Admirals Club one-day pass has to be used by February, and there's an incentive to earn even more by booking more flights through the first two months of 2021. 

Carnival's Sapphire Princess coasting along the ocean.

Image source: Carnival Corporation.

Carnival

The world's largest cruise line isn't sailing again with most of its fleet until well into 2021 at this point. Carnival and its smaller rivals have taken advantage of brief stock rallies to print more shares and boosting liquidity, but that's not the reason Carnival is being identified as a bad stock doing a good thing in these very challenging times. 

Earlier this year Carnival announced that it was disposing 18 of its more inefficient ships. The move would cost it 12% of its revenue but just 3% of its operating profit. Another way Carnival is making sure it hits the ground sailing next year is making the most of its itinerary cancellations. Three of the ships with nixed cruises through the next six to nine months are going in for the dry dock maintenance and refurbishment that ships go through every few years. Consumer demand may be an issue when cruise lines finally start sailing again, but making sure its ships are in -- pardon the pun -- shipshape when the time comes will be one less thing to worry about. 

AMC Entertainment, American Airlines, and Carnival aren't always brilliant companies. They have all been dealt a crummy hand in 2020. It won't be easy to bounce back for all three, but you have to like how they're making smart moves to given them the best chance to succeed in the future. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Carnival Corporation Stock Quote
Carnival Corporation
CCL
$18.74 (0.82%) $0.15
American Airlines Group Inc. Stock Quote
American Airlines Group Inc.
AAL
$18.07 (0.78%) $0.14
AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
AMC
$31.13 (8.13%) $2.34

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