AMC Entertainment (AMC -5.01%) share prices popped after the company saw a record Memorial Day weekend, and investors got excited about the prospects of a strong summer movie season ahead. However, the stock is still very beaten down, with shares trading down roughly 31% over the past year as of this writing and down almost 90% over the past five years.
AMC has made a lot of strides since the pandemic, when movie attendance collapsed. However, with movie theater attendance still well below pre-pandemic levels and AMC carrying massive debt, the company is still walking a tightrope. Let's see if there is a road to recovery for the stock.
A box office recovery play with a debt problem
AMC remains the largest movie theater chain in the U.S. and Europe, with roughly 900 locations and more than 10,000 screens worldwide. The company is focused on driving higher revenue per moviegoer by leaning into premium formats like IMAX, Dolby Cinema, and its own "XL at AMC" large-format screens. It's also expanded its dine-in offerings and started serving alcohol at many locations, which is helping boost high-margin food and beverage sales.
Image source: Getty Images.
Overall movie attendance is still down nearly 40% from pre-pandemic levels, hurt by fewer theatrical releases and a shorter window before films hit home streaming. However, the bright side is that its focus on premium formats and food and beverages has led to AMC making a 51% higher incremental profit per moviegoer now compared to 2019. This means that it doesn't need to return to the same pre-pandemic attendance levels to attain the same profitability it saw before the pandemic.
That said, AMC's most recent quarterly results were a reminder of how volatile the movie business can be. Revenue fell 9% year over year to $862.5 million, marking the weakest domestic box office performance for a first quarter since 1996. Management credited this to a soft film slate and the lingering impact of last year's Hollywood strikes, which delayed production and pushed back several major releases.
However, there were bright spots. The company noted a sharp rebound in April, with ticket sales more than doubling from the prior year, and said May looked strong as well. AMC is also leaning into summer momentum with targeted promotions like 50%-off Wednesdays for loyalty program members. The optimism appeared warranted, as the company later announced a record-breaking Memorial Day holiday weekend performance. It said it generated the most food and beverage sales over a five-day period this decade and the second most in its history.
Still, AMC's financial position remains tenuous, with the company ending the quarter with more than $4 billion in debt and just $378.7 million in cash. Meanwhile, it had free cash flow outflows of $417 million for the quarter.
AMC's single biggest challenge is its debt. It paid $407 million in interest expenses in 2024, which led to a negative operating cash flow of $50.8 million on the year. The company has made some moves to strengthen its finances, including raising more than $1 billion in equity in 2023 and 2024; however, this has come at the expense of diluting shareholders.
To its credit, AMC is doing a lot of things right operationally. It continues to invest in and expand premium formats like IMAX and Dolby, which have higher ticket prices and appeal to moviegoers looking for an experience they can't get at home. It's also continued to upgrade theaters to include dine-in service and alcohol sales, and it has recently introduced new rocker seats at select high-traffic theaters.
With Hollywood now back in full swing with the strikes over, the film release schedule is finally starting to normalize. In fact, AMC has said that the movie release schedule through the end of 2025 is one potential barn burner after another. That should help drive more consistent attendance throughout this year, which AMC desperately needs.
Is AMC stock a buy?
AMC is still in the middle of a high-stakes turnaround. The company has survived the storm and positioned itself to benefit from a moviegoing rebound. The upside is there if attendance returns, cash flow improves, and management can begin to meaningfully pay down debt. A strong movie slate for the rest of the year could be just what the stock needs to keep its recent momentum.
That said, there is also a lot of potential for error. Until we see sustained positive cash flow and clear progress on reducing debt, this stock is still best treated as a speculative play.
