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Where Does AMC Stock Go From Here?

By Rick Munarriz - Jun 21, 2021 at 10:12AM

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Movie theaters have seen double-digit declines in week-over-week audience counts for three consecutive weeks. Things will get better.

The summer season is off to a rough start for multiplex operators, and AMC Entertainment Holdings ( AMC 7.19% ) may seem vulnerable here, despite the rallying shares. Investors initially cheered that U.S. box-office receipts during Memorial Day weekend were nearly half of where ticket sales were two years ago. Audiences have contracted in each of the three subsequent weekends. 

  • May 28-31: $98.3 million
  • June 4-6: $66.1 million
  • June 11-13: $57.0 million
  • June 18-20: $46.4 million

The $46.3 million in overall gross ticket sales by exhibitors during Father's Day weekend is 66% below where the industry was in the third weekend of June in 2019. Put another sobering way, just 1.5% of the country went to the movies this past weekend.

It's a grim trend, cutting against the narrative of one of this year's hottest stocks. The summer will get better from here, and ideally, the prospects for AMC will follow suit. 

A couple watch a movie in a crowded theater as they enjoy popcorn and a beverage.

Image source: Getty Images.

Roll credits

You won't have to wait long for the downward trend in ticket sales to hop in the getaway car and press down hard on the accelerator pedal. F9 -- the highly anticipated ninth installment in The Fast and the Furious franchise -- hits a multiplex near you this weekend. It's the big-action movie that benefits from being watched on a gargantuan screen in a crowded movie theater. In short, it's the fare that folks expect in a summer blockbuster.

It also only helps that F9 won't be streaming -- legally, at least -- in your home. Some of the disappointing debutantes over the past few weeks include Cruella and In The Heights, which are also available through premium streaming services.

It's not a coincidence that A Quiet Place Part II has been one of the two most watched movies in each of the past four weekends. The sequel to the apocalyptic film won't hit the home market until it lands on Paramount+ next month.

Another encouraging sign at AMC is that it's gaining market share just as exhibitors are starting to turn the corner. Foot-traffic analytics firm Placer.ai finds that AMC is holding up better than the competition. It finds that customer counts at AMC locations during the Memorial Day weekend were down 49% when pitted again the same holiday run in 2019, but that's a lot better than the 60% decline at Cineworld Group's ( CINE 5.45% ) ( CNWGY -10.38% ) Regal.

AMC has done a lot of things right during the lull, and that begins with staying open late last year after Cineworld shuttered its movie houses as movie studios shifted release dates into 2021. AMC took the financial hit by staying open at a time when consumers and Hollywood studios were scared to come back to the multiplex, but it's now ahead of the curve in the reopening process. 

AMC is a better business right now. It made the most of last year's downtime by rolling out mobile concessions ordering, easily accessible private screen rentals, and next-gen seat reservations across the chain. It's also now galvanizing its millions of retail investors, hoping to turn them into customers, if not brand ambassadors.  

Are there valuation concerns when it comes to AMC? Sure. The stock is nearly a 30-bagger in 2021. Its share count has roughly quadrupled over the past year.

The stock will continue to be volatile. However, AMC's fundamentals are about to get better relative to other entertainment stocks in the coming weeks.

F9 should shatter pandemic-era records this weekend. Its success along with A Quite Place Part II could convince other movie studios to reconsider streaming availability the moment a new film hits theaters. In The Heights is the kind of well-reviewed feel-good film that would be a summer smash under normal circumstances. I'm one of just 0.6% people in the country who has seen it at a movie theater -- an AMC, of course -- because it's freely available from home to anyone with an HBO Max password.   

AMC has done everything right to make sure that it's stronger now than it was before the pandemic began. With folks itching for social experiences and movie studios finally comfortable turning on the firehose of content, this summer is getting ready to heat up.

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

AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
AMC
$30.86 (7.19%) $2.07
Cineworld Group plc Stock Quote
Cineworld Group plc
CINE
$53.06 (5.45%) $2.74
Cineworld Group plc Stock Quote
Cineworld Group plc
CNWGY
$2.59 (-10.38%) $0.30

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

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