What happened
Shares of AMC Entertainment (AMC) continued to tumble Wednesday morning despite an earnings report that handily beat Wall Street expectations.
AMC stock was down by 7.5% as of 11:21 a.m. ET following a 5.4% drop Tuesday. But considering that this slide began after the stock first jumped by almost 12% at its Tuesday peak, that makes this a 22% rout so far.
Image source: Getty Images.
So what
AMC's first-quarter earnings report actually had a lot of meat on the bone for investors. The theater chain showed a five-fold year-over-year increase in revenue and a significant narrowing of its losses. Management also said it expects revenue to be close to its pre-pandemic levels by the fourth quarter, and forecasts positive operating cash flow by then as well. Revenue per patron was 34% higher than it was in pre-pandemic periods due to the company's implementation of a dynamic pricing model that raises ticket and concession stand prices during peak demand periods.
Now what
It's worrisome, though, that amid this revival of the movie industry, AMC still can't turn a profit. The company also carries a lot of debt and is burning through cash -- a situation it admits is "unsustainable," though it expects that to change in the coming quarters.
A large slate of big-budget movies will premiere over the rest of the year, and those should help boost theater attendance. AMC will also launch a number of new initiatives soon, such as selling AMC branded popcorn in retail stores and making its freshly popped popcorn available for home delivery direct from its theaters.
But considering the company's financial health, the long-term downtrend in theater attendance, the threat that video streaming services still represent, and a promise to keep investing in financially questionable businesses, there are a lot of issues contributing to the pressure pushing this movie theater stock lower.
