AMC Entertainment Holdings Inc. (NYSE: AMC) continues as a favorite among pump-and-dump investors. How many other stocks can post days of sharp increases in shares followed by breathtaking sell-offs? None of this movement has anything to do with the deep trouble in an industry as streaming dominates. AMC has no way to overcome that.
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Recently, investors have compared AMC to Cineworld, which is number two in the movie theater industry. Cineworld has been pounded into insolvency by theater attendance that never entirely recovered from the COVID-19 pandemic-triggered decline in attendance.
AMC answered this news with a statement from its board chair and chief executive, Adam Aron, who said the industry will be tough for much of the balance of the year. Then, he forecasts, “However, we continue to be quite optimistic about the increasing demand for our portfolio of movie theatres in the fourth quarter of 2022 and calendar year 2023.” He cited his company’s balance sheet as strong enough to take it through what still may be a major storm.
The market still has to wrestle with what AMC is really worth. In the past two years, its shares are off by 47%. That would put its underlying market cap at $2 billion, which is still too high for a company that lost $121 million in the most recently reported quarter, on revenue of $1.1 billion.
AMC investors, and those who may invest, hope to get on the ride when its shares make a double-digit percentage move up. To do so requires split-second timing and a large dose of good luck. Long term, as tens of millions of consumers jump to streaming as their primary way to watch video, AMC has no solution to the trend.
Troubled companies share a few things in common. One is a stock price that has sold off long term. Another is a business model that has aged too much to allow it to be competitive. Wall Street has put AMC into both categories.
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