1 Step Down, 2 Big Steps to Go for AMC Stock

We’re finally closing in on AMC Entertainment Holdings (NYSE:AMC) at full strength. The country’s leading exhibitor will reopen another 40 movie theaters by Friday afternoon, including all of its more than two dozen multiplexes in the densely populated Los Angeles and San Diego markets. It will have 98% of its U.S. circuit open by tomorrow, and it expects to be up to 99% by next weekend. 

This naturally doesn’t mean that AMC is almost back at full strength. Its theaters can sell 40% or less of its available seats right now, and guests must be socially distanced. In California the cap is 25% or 100 moviegoers per screening, whichever is less.

The limit isn’t a deal breaker right now. Actual ticket sales have been well below the new normal capacity constraints. Domestic box office receipts for the industry were down 92.4% last month when pitted against last February, and it’s not as if theaters were packed anyway before the pandemic. AMC reopening is theaters is a big positive step, of course. Now it just needs supply (i.e., big Hollywood content) and consumer demand to play along. 

Masked patrons enjoying a movie in a socially distanced theater.

Image source: Getty Images.

If you build it they may come  

If you’re AMC Entertainment this is an exciting time. You made the most of the lull by improving your seat selection technology to make sure that nearby seats are blocked out the moment that reserved seats are purchased. Mobile ordering of concessions to help speed up the fulfillment of high-margin snacks and beverages is now the rule instead of the exception. You also didn’t stop building during the downturn. Two new theaters in Los Angeles will open between Friday and Monday of next week. 

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The problem right now is that customers are still hesitant to come out to even a mostly empty theater. It also doesn’t help that Hollywood is either holding back on its most magnetic content or releasing its new films on streaming platforms at the same time that they’re hitting theaters. 

As for moviegoers, there is definitely pent-up demand to enjoy blockbusters in a busy and buzzing multiplex. However, a lot has happened since movie theaters went dark a year ago. There’s a plethora of new streaming services, including AT&T‘s HBO Max, which is making every Warner Bros. release in 2021 available from home. High-def large-screen TVs have only gotten cheaper. Some new habits will be hard to break.

Hollywood can definitely help break those new creature comforts. It’s been holding back on some of its best content. It’s fair to say that if Tenet had timed its theatrical release to later this month instead of Labor Day weekend last year it would’ve sold more than $46.3 million in stateside tickets.

The big movies will start to come now that most of AMC is open for business, but the competition — like the predator’s phone call in When a Stranger Calls — is coming from inside the house. Warner Bros.’ Godzilla vs. Kong will be a big draw for moviegoers when it opens next weekend at an AMC theater near you, but it will also be streaming on HBO Max. Paying $14.99 a month for HBO Max — or getting it at no additional cost if you’re a select AT&T wireless customer or existing HBO subscriber — is going to be less than what a pair of movie tickets will cost you on average.

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Movie studios are also media stocks with digital platforms that they are favoring these days. Moviegoers can rattle that strategy, of course. If folks return to the multiplex even when a film is readily available on streaming services Hollywood may rethink its revised release windows. Like an M. Night Shyamalan movie, there will be more twists here before the credits role. AMC is doing its part. It will have 99% of its theaters open by the end of the month. Now it just needs patrons and producers to stick to the script and give the industry a Hollywood ending.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.


View more information: https://www.fool.com/investing/2021/03/18/1-step-down-2-big-steps-to-go-for-amc-stock/

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