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Why AMC Entertainment Is Falling Again Today

By Rich Duprey – Aug 11, 2021 at 1:15PM

Key Points

  • AMC's business is doing much better than Wall Street anticipated, though it's still losing money.
  • A return to equilibrium for the movie theater business is still a year or more away.
  • There is reason to hope AMC and the industry will emerge in a good position.

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The theater operator's earnings report Monday was seemingly not well received by the market.

What happened

Shares of AMC Entertainment (AMC 0.12%) continued falling on Wednesday following the company's second-quarter earnings report after the market's close on Monday. Although the movie theater operator beat Wall Street expectations on the top and bottom line, AMC is still producing significant losses. The stock was down 4.4% in midday trading.

So what

Cinemas are slowly climbing out of the very deep hole the pandemic dug for them, but the markets have expressed doubts about AMC's valuation, which has soared because of retail investor support for the heavily shorted movie theater stock.

Empty theater with red curtain.

Image source: Getty Images.

AMC and other theater operators are expecting business to begin a long, steady rise -- one that probably won't get back to normal for several years. Talk of coronavirus variants poses a potential setback to a full theater recovery.

Now what

It remains a hopeful time for theater owners as studios are producing and releasing films into theaters once more. They'll still need to work through the slog of movies that are slated to be simultaneously released to streaming services this year (or will bypass theaters altogether), but the agreement AMC just signed with AT&T's Warner Bros. studio to guarantee a 45-day window of exclusivity for movies released after 2021 indicates theaters are still an important component of the industry ecosystem.

Moreover, Disney is being sued by Black Widow star Scarlett Johannson over its simultaneous release of the superhero flick because of lost wages, suggesting day-and-date releases may have been a short-lived phenomenon.

Rich Duprey owns shares of AT&T. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool has a disclosure policy.

Stocks Mentioned

AMC Entertainment Stock Quote
AMC Entertainment
AMC
$8.18 (0.12%) $0.01

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