It's lights. It's camera. Will it be action for AMC Entertainment (AMC -1.03%)? The country's largest multiplex operator is delivering a critical financial update shortly after Thursday's market close.
There's a lot riding on AMC's quarterly report this week. The bar may not seem low. Analysts see a narrowing deficit on $1.16 billion in revenue. This is a whopping 161% increase over where it landed for the same three months a year earlier, but stay with me. Domestic ticket sales during the second quarter soared 186%. There's an international component to AMC's numbers, but let's peel back another curtain. Food and beverage sales -- the high-margin part of the multiplex business -- clocked in 40% higher per patron than the year before in the first quarter. A robust slate of films enhanced by thirsty and hungry moviegoers is a pretty potent combo.
The analyst consensus is actually pretty low. It should be a good day for a beat, but AMC will need more. The stock is up 74% since bottoming out in May. Let's look at another potential catalyst.
A pounce of prevention
It's been four weeks since Aron's head-turning "Wen pounce?" tweet. The social media posting suggests that AMC will go after its short-selling naysayers following Thursday afternoon's second-quarter results.
I keep getting asked "Wen pounce?" Know this: 1. I always keep my word. 2. I've said publicly a pounce would not happen before Second Quarter 2022 earnings are announced. 3. Press release issued today that Q2 earnings to be announced on Thurs, August 4. Read between those lines.-- Adam Aron (@CEOAdam) July 7, 2022
Are we talking about a blowout quarterly performance that will send the shorts scrambling to cover? The multiplex industry had a strong second half to the quarter. If it's not a matter of telegraphing strong financials, is Aron prepping a plan to go after naked shorts and other boo birds?
Aron hasn't shied away from playing a dangerous game. He has embraced AMC's status as a meme stock, becoming a cult icon who routinely travels across the country to meet retail investors at movie screenings. He's a colorful follow on the socials, riding the tide of any trends percolating among the exhibitor's millions of retail investors. At the end of the day, he will still have to be accountable.
AMC flooded the market with new shares to stay afloat last year, popping its outstanding share count by fivefold. It's also holding a sizable chunk of debt in a rising rate environment. This doesn't mean that AMC is toast. The quarter should be strong on both ends of the income statement, and anything that lays to rest questions about the viability of the multiplex industry will help shake out the speculators betting against AMC.
Will Aron live up to the hype? He runs the country's largest multiplex chain, and AMC is the bellwether for movie theater stocks. He has been pitching AMC's earnings report -- and what could follow -- since that tweet heard around the meme stock world four weeks ago. The stock is up 33% since the post. Analyst expectations are a low bar, but Aron's tease needs to be special. AMC Entertainment certainly has a lot to prove this week.