Movie theater chain AMC Entertainment Holdings (AMC -12.04%) is on the mend following a disastrous, pandemic-crimped 2020. Last year's top line of a little more than $2.5 billion more than doubled the prior year's revenue of only $1.2 billion. And, thanks to the box office hit Spiderman: No Way Home, the final quarter of 2021 accounted for nearly $1.2 billion of that full-year total. CEO Adam Aron believes U.S. ticket sales could nearly double on a year-over-year basis again in fiscal/calendar 2022. Maybe he's right.
Don't get too excited about that prospect, however. Even at twice 2021's ticket sales tally, the domestic movie industry would still be smaller than it was before the COVID-19 pandemic rattled it. Perhaps worse, there's good reason to think Aron's outlook may be a bit too optimistic.
The rebounding movie business is still in trouble
There's no ambiguity about his expectation. Aron plainly stated during Tuesday's quarterly conference call, "As we look forward to the full calendar year of 2022 ... we think that the overall domestic industry box office, which is a good placeholder for the size of our industry, both here in the United States and abroad, could be nearly double that of 2021." He added, "And that makes us in AMC bullish about our continued progress."
Fair enough. And given how the December release of Spiderman: No Way Home generated the sort of box office demand produced by pre-pandemic must-sees like Walt Disney's Frozen II and most of its Avengers franchise flicks, the optimism is understandable.
Except for this: The smashing success of the most recent Spiderman film may be a fluke, and a short-lived one at that.
Image source: Getty Images.
The graphic below puts things into perspective. Spiderman knocked it out of the park when it was a new release, leading total U.S. box office sales of $282.9 million for the weekend ending on December 19th. That's the business's best weekend since Frozen II led a box office take of $262.3 million in the final weekend of November 2019. The follow-through since then, however, has been anemic. Ticket sales are sliding back to 2021's ho-hum levels.
Data source: Box Office Mojo. Chart by author.
Part of that tepidness can be chalked up to a lack of high-profile films like Spiderman: No Way Home. Lackluster titles can't get all the blame, though. This upcoming weekend's entry into the Batman series of movies -- this one is just called The Batman -- is more than splashy enough. Yet, film industry analysts only anticipate U.S. ticket sales of between $100 million and $140 million for its opening weekend. That's roughly half the most recent Spiderman film's take. It could be a sign that December's huge box office had more to do with bored consumers looking for anything new and different to do. With that proverbial itch scratched, streaming at home could once again be good enough.
And it's this lethargic restart of the movie industry that casts a shadow of doubt on Adam Aron's stated expectations for this year.
Just for the sake of discussion, drop the "almost" qualifier from his suggestion that U.S. film ticket sales "could almost double," and instead let's optimistically entertain the idea that a true doubling is in the cards. Presuming AMC Entertainment captures its usual share of this business, that should pump up the company's 2021 top line of $2.5 billion to $5.0 billion in 2022. That's still less than the company's all-time peak revenue of just under $5.5 billion in 2019 though, and for what it's worth, the analyst community only foresees sales of $4.6 billion this year.
Data source: Thomson Reuters. Chart by author.
It's not a devastating shortfall. It does call into question, however, just how strong this rebound really is. Underscoring that question is the fact that the same analysts doubting AMC will be able to meet Aron's lofty 2022 revenue expectations also think the theater chain will remain in the red at least through 2024. That's not tough to believe in light of the fact that the company was barely profitable even before the COVID-19 pandemic upended the entire industry.
Skip this box office flop
Never say never. Everything about this business -- and about the company itself -- is changing on a regular basis now. As an example, AMC is wading into NFT waters, and the company is now selling its popcorn through a variety of retail venues. It's far too soon to know if these initiatives (or any new ones in the meantime) will make a meaningful fiscal difference. But, it's at least worth a shot.
On balance, however, there's still just not enough profitable revenue in the cards for most investors to risk owning this name. It'll be fun to watch the revitalization effort from the sidelines, though.
