AMC Entertainment Group (AMC) is capturing people's attention again, but for a different reason than it did most recently.
The company has been on people's minds and lips for the part it played in the meme-stock frenzy of 2021, when retail traders grouped on social media forums and encouraged each other to buy and hold the stock. As a result, the price of AMC skyrocketed by more than 2,000% at one point before giving up most of those gains later.
Of course, the company was devastated when it had to close its theaters to visitors at the pandemic's onset. Fortunately for shareholders, business is bouncing back. Management announced that July 7 through July 10 was its busiest weekend of 2022 and better than the comparable weekend before the outbreak in 2019.
AMC has its best weekend in a long time
That's excellent news for AMC, which, even though it is recovering, has yet to surpass 2019 levels of revenue in any quarter since the outbreak. Indeed, revenue surged by more than 100% in 2021 to $2.5 billion, but it was still less than half the total of $5.5 billion reached in 2019. AMC will need many more weekends like the one noted above to bounce back entirely from pandemic's devastation.
Time is working against the movie theater chain. It has $5.5 billion of high-interest debt on its balance sheet, which has cost the company $82 million in interest expenses in its first quarter of 2022. If AMC does not get things rolling quickly, it will have difficulty paying back the principal on those debt agreements.
At the height of the pandemic, movie studios were releasing potential blockbuster films straight to streaming services or delaying their releases entirely. AMC management was encouraged that the July 7 weekend consisted of several hit titles driving the revenue increase for AMC. It was the first-weekend release of Thor: Love and Thunder, which already boasts more than $400 million in box office revenue. Folks were still interested in seeing Top Gun: Maverick and Jurassic World Dominion, which have raked in $1.2 billion and $902 million in revenue, respectively.
It's an encouraging sign for AMC that the positive results were driven by several films and not just one massive hit title. That could signal broad-based consumer interest in returning to theaters for movie night.
Too early to buy AMC stock
But it is too early to buy AMC stock. While its valuation -- as measured by the price-to-sales ratio -- has come way down from the unsustainable, meme-stock levels of last year, it's still way above longer-term levels. And that's even though revenue has cratered, expenses have risen, and debt is higher.