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Are We Finally in the Good News Cycle for AMC Entertainment Stock?

By Rick Munarriz - Mar 23, 2021 at 9:50AM

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The country's second-largest multiplex operator is opening again, and it's getting at least one major studio to agree to theatrical distribution exclusivity.

James Bond shut down Cineworld Group's (CINE -0.46%) (CNWGY 0.00%) Regal Cinema chain in October. King Kong and Godzilla are teaming up to get the country's second-largest multiplex operator to open back up again next week.

It's been nearly six months since Cineworld closed its 543 Regal theaters in the U.S. as well as all of its movie houses in the U.K. and Ireland. MGM's decision at the time to push the theatrical release of James Bond's No Time to Die into 2021 was the final straw -- in a vodka martini that was shaken, not stirred -- for Cineworld. Now it plans to open select theaters in time to screen Godzilla vs. Kong on April 2. It will ramp up its reopening schedule to have more theaters open by the time Mortal Kombat hits the big screen two weeks later.   

Seeing its largest rival fire up its digital film projectors and popcorn makers again may seem like bad news for AMC Entertainment Holdings (AMC 2.55%), but it's actually the opposite. AMC needs competing multiplex operators open for movie studios to justify releasing films in cinemas instead of directly to consumers through a growing number of streaming services. Cineworld's restart is good news for all exhibitors, and it's not the only thing going their way.

Masked up moviegoers at a multiplex watching a movie.

Image source: Getty Images.

Advancing the plot

The return of Regal Cinemas next weekend isn't the only positive development for the industry. Cineworld brokered a multi-year agreement with AT&T's (T -0.45%) Warner Bros. that will offer a 45-day window of theatrical exclusivity for U.S. releases beginning next year. This is a pretty big deal.

Multiplex operators had wider exclusivity windows before the pandemic, but AT&T is releasing its entire 2021 film slate to HBO Max subscribers at the same time they hit the silver screen. It would've been devastating to AMC, Cineworld, and smaller chains if AT&T had chosen to continue building up HBO Max accounts at the expense of box office receipts. There is no turning back to the pre-COVID-19 model, but 45 days will at least give chains a fighting chance to get movie buffs back into their reclining leather seats. It remains to be seen what other media companies will do with their upcoming releases. 

The positive developments out of Cineworld and Warner Bros. come in a month when AMC itself was also cranking out some good news. March began with AMC reopening key theaters in New York, and it will end with most of its California screens back in business. A whopping 99% of AMC locations will be open by this weekend. 

As the corner multiplex starts showing signs of life we're also seeing vaccination rates pick up. Nearly a third of the country's adult population has now received at least one COVID-19-tackling vaccine dose. 

We still have a long way to go before we can confirm that consumers are ready to return to the multiplex and that Hollywood will prioritize theatrical distribution over streaming services. However, small steps in the right direction are starting to turn into larger steps. There is still time -- and hope -- for a Hollywood ending. 

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Stocks Mentioned

AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
AMC
$13.23 (2.55%) $0.33
AT&T Inc. Stock Quote
AT&T Inc.
T
$20.48 (-0.45%) $0.09
Cineworld Group plc Stock Quote
Cineworld Group plc
CINE
$23.90 (-0.46%) $0.11
Cineworld Group plc Stock Quote
Cineworld Group plc
CNWGY
$1.20 (0.00%) $0.00

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

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