main learning points
- AMC became a popular investment as a meme stock, resulting in incredible volatility.
- There are signs that AMC is on the right track, with people returning to movie theaters and the company earning more per visitor than it did before the pandemic.
- AMC has many hurdles to overcome, especially the rising popularity of streaming.
AMC stock has been on a rollercoaster for over a year now. The company was on the verge of bankruptcy and only survived thanks to the pandemic – tadaa! Share investor.
However, should you invest your hard-earned money in AMCs? Or has that time passed?
amc stock in the news
On November 21, 2022, AMC’s stock price fell to $8 per share. This is a significant loss from the price of over $41 a year ago. The theater chain reported a loss of $0.22 per share in Q3 earnings for fiscal 2022, for a total loss of $226.9 million.
The stock has had its share of ups and downs and has also undergone a stock split, which has also fallen in value since late August 2022.
Stock Split, known by the ticker APE or AMC Preferred Equity Shares, is a tribute to traders on Reddit who call themselves monkeys. Retailers helped save the theater chain by buying up and boosting its share price to avoid bankruptcy during the pandemic.
Private investors turned AMC into meme stock the same way they turned Gamestop into meme stock. His reason for investing in AMC was a combination of nostalgia, not wanting bankruptcy to destroy the chain, and an effort to hold the wealthy accountable.
Many of these investors were millennials who loved going to AMC movie theaters as kids to watch movies. He resisted the loss of his favorite movie chain by purchasing a large number of shares.
In addition, hedge funds, investments in which many high net worth individuals invest, tend to short AMC stock. This means that the hedge fund has made an investment that will make money when the stock falls in value.
These funds believed that AMC stock was trading for more than the company was worth. As retail investors drove up the share price, hedge funds investing for the lower share price had to buy shares to cover their short positions, resulting in losses.
AMC CEO Adam Aaron has publicly thanked retail shareholders for helping to save the company as it contributed $2.2 billion in equity. Now the company is able to continue growing and expects gradual growth in 2023 and 2024.
The APE security was launched as another way to raise capital, but Arona views the security as a way to slowly build equity and doesn’t expect it to see rapid growth.
Review of the AMC income statement
AMC reported total revenue of $2.9 billion for the third quarter of fiscal 2022, with $1.6 billion generated from admissions, $982.5 million from food and beverage, and $297.9 million from other theater revenue.
The chain’s total revenue for all of 2021 was $2.5 billion. Operating costs and expenses include $781.7 million in screening costs, $165.7 million in food and beverage costs, $1.1 billion in operating expenses and $668.8 million in rent.
It reported a net loss of $685.9 million for the nine months of 2022, compared to a net loss of $1.1 billion for the same period a year earlier. For the third quarter of 2022, AMC reported a net loss of $226.9 million.
Review of AMC balance statement
AMC reported cash and cash equivalents of $684.6 million at the end of the third quarter. It also has $125.7 million in other non-current liabilities and $56.2 million in finance lease obligations.
Free cash flow is $278.1 million negative for the third quarter.
amc stock outlook ahead
Obviously, AMC’s stock has taken a hit, but that only tells part of the story about the theater chain. In 2019, the company had $265 million in cash and managed to grow that amount to $308.3 million in 2020 despite the pandemic.
The company’s cash reserves reached $1.59 billion, which will drop to $684.6 million by the third quarter of 2022. ,
AMC is still recovering from the impact of the pandemic lockdown in 2020 and 2021. It recently restructured its debt, moving the maturity date to 2027 and reducing the amount of outstanding debt. This should help to return to profitability in the coming years.
The good news is that visitor numbers are returning. Before the pandemic, global visitor numbers in the first nine months of the year were 264.8 billion in 2018 and 263.8 billion in 2019. For the same period in 2022, the number of visitors was 151.3 billion.
This number should continue to rise as countries continue to ease lockdowns.
Another positive sign for AMC is the higher ticket prices. In 2019, the average ticket price for the first nine months of the year was $9.19. The average ticket price rises to $10.83 for the same period in 2022.
The AMC also saw the amount that people spend on concessions increase. In the first nine months of 2019, average food and beverage revenue per customer was $4.86, compared to $6.49 for the same period in 2022. It all comes with small screens showing AMC movies.
However, the other major factor for AMC is the release of new movies. Many movie studios make deals with streaming services to release new movies on these platforms. Sometimes studios bypass theatrical releases entirely, which can hurt AMC’s profitability.
It boils down
AMC’s stock may never reach the highs seen during the peak meme stock period, but it’s still a viable business as people want to go to movie theaters to watch movies. This has been proven over the past few decades as moviegoers want the experience of watching a movie on the big screen to get a sense of involvement that TVs, computers and tablets can’t match.
The entire stock market has taken blow after blow as a result of various economic forces and increases in the federal funds rate. AMC’s price loss is in line with what the rest of the stock market has experienced.
This stock is worth buying in the long run as the CEO is positive about the future and has a prudent plan to improve the chain to provide more value to moviegoers and shareholders alike.
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