Please ensure Javascript is enabled for purposes of website accessibility

Why AMC Entertainment Stock Rallied 10% at the Open Today

By Reuben Gregg Brewer - Mar 11, 2021 at 10:43AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The movie chain posted earnings, which were dismal, but investors were still upbeat thinking the future will be brighter than the past.

What happened

Shares of movie theater operator AMC Entertainment (AMC -10.28%) rallied a quick 10% at the open of trading on March 11. That comes a day after the company reported earnings, news that was released after the close of trading on March 10. But today's gain needs to be taken with a grain of salt.  

So what

AMC's top line came in at $162.5 million during the fourth quarter of 2020, down from $1.4 billion in the same period of the previous year. That's a huge 89% decline. The adjusted loss for the quarter, meanwhile, was $3.15 per share, down from a profit of $0.35 in the prior year. These are truly dismal results, but, to be fair, they were driven by the coronavirus pandemic and the worldwide efforts to slow its spread. Investors were upbeat, anyway.  

A hand holding a pen pointing to a candlestick chart with stock quotes in the background.

Image source: Getty Images.

One reason for the positive mood at the start of trading was that AMC Entertainment's loss was a penny less than what analysts had been expecting. And, perhaps more importantly, the company's revenue was roughly $20 million higher than the $142.4 million Wall Street was looking for. Investors tend to like it when companies beat expectations, so a price bump makes some sense on that front. During AMC Entertainment's fourth-quarter 2020 earnings conference call, however, management also noted that it was no longer in survival mode thanks partly to the cash it was able to raise over the past year. That was likely the really exciting news, suggesting that AMC can now focus on turning its business around as vaccines become more widely available.  

Now what

There's no way to candy coat the fourth quarter; AMC Entertainment's business performance was incredibly weak. There were good reasons for that, but there are also implications for the future here. Yes, vaccines will help to get people comfortable That back to the movie theater, but how quickly that happens is still an unanswerable question. Which means conservative long-term investors will probably want to stay cautious with AMC, taking a "show me" attitude, since it could be quarters or even years before the movie business fully recovers -- if it ever does, given the way the pandemic has changed how media is consumed.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
$10.39 (-10.28%) $-1.19

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.