Last week was huge for the two most popular meme stocks. Shares of AMC Entertainment Holdings (AMC -8.03%) and GameStop (GME -3.56%) soared 39% and 92% higher for the week, respectively. If this were late January, we would attribute the pops to Reddit-fueled short squeezes for fundamentally flawed nostalgia stocks, but things are different this time.
On one hand, short interest has contracted dramatically for the multiplex operator and video game retailer over the past two months. There are fewer naysayers betting against the meme stocks to squeeze out. However, unlike the original frenzied rally earlier this year that blindsided shorts with its ferocity, this time around there are actually positive business catalysts triggering the renewed market interest in AMC Entertainment and GameStop.
AMC goes Hollywood
More AMC locations continue to fire up their projectors, and later today a pair of iconic Los Angeles movie theaters will reopen after a yearlong shutdown. AMC expects nearly all of its 56 multiplexes in California to be open by Friday, as long as local approvals are secured. With New York City reopening its theaters earlier this month, we finally have AMC serving the country's two largest markets for the first time since mid-March of last year.
AMC isn't exactly at full strength yet, though. Audiences are limited to between 20% and 40% of a theater's capacity, and to be fair that's not what's really keeping numbers down. Box office receipts across all theater chains fell 92% last month relative to February of last year, and that's pretty much where ticket sales have been for the past five months. Folks aren't comfortable returning to even largely empty theaters in the pandemic. A lack of exclusive content is also hurting, as three of this year's four highest-grossing movies -- Tom and Jerry, Wonder Woman 1984, and Raya and the Last Dragon -- were available to stream at home the same day they hit local multiplexes.
Things should get better on all fronts. Just 11% of the country is now fully vaccinated against the COVID-19 virus, but nearly twice as many folks have already received the first dose. More than a third of all seniors are now fully vaccinated. The percentages will improve, and President Biden has said that there should be enough vaccines on hand to cover all adults by the end of May.
There's also encouraging news of movie buffs flocking to theater chains in markets outside the U.S. market. Avatar overtook Avengers: Endgame in worldwide gross over the weekend, a seemingly throwaway stat of the planet's two highest grossing films if not for the fact that it happened because the reissue of Avatar in China raked in $21 million in ticket sales. A single old movie scored more box office receipts in China than all U.S. ticket sales combined this past weekend.
One can argue that things have changed closer to home. Hollywood has fully embraced digital streaming alternatives, and media stocks are hitting fresh highs these days because the market appreciates the potential of the direct-to-consumer platforms that they're feeding. We'll find out more where consumers are at when studios start cranking out the tentpole releases that they have pushed out into this summer and beyond. AMC's prospects of surviving are ultimately brighter now than they were a week ago.
GameStop plays a new game
The catalyst for the video game retailer came early in the week. GameStop announced that it was starting a new Strategic Planning and Capital Allocation Committee, chaired by board member and Chewy co-founder Ryan Cohen. He would be joined by two fellow activist board members in championing an e-commerce makeover.
It isn't a new thing for GameStop to go digital. The chain has tied to make a play for the direct-to-consumer market before. However, with fresh eyes -- and a brand that became a lot more ubiquitous in recent weeks -- GameStop has a fighting chance.
Bears will argue that the valuations make even less sense for both AMC and GameStop stock after last week's surge. However, it's refreshing to see the stocks move higher on positive developments rather than just speculative crowdsourcing.