Shares of movie theater operator AMC Entertainment (NYSE:AMC) reached a high of 12% in early trading on Jan. 6. Tanger Factory Outlet Centers (NYSE:SKT), which, as its name implies, owns factory outlet centers, peaked at nearly 11%. And amusement park operator Six Flags Entertainment (NYSE:SIX) hit a high of roughly 10%.
At 1:30 p.m. EST, Tanger and Six Flags were still holding on to their gains, but AMC’s advance had been cut roughly in half. The story goes back to early 2020, but today’s moves were driven by the runoff elections held in Georgia on Jan. 5.
Although three very different companies, they all share one important trait: The coronavirus pandemic caused their businesses material harm. AMC and Six Flags were shut down when the government closed nonessential businesses in an effort to slow the spread of the novel illness. Tanger’s largely outdoor shopping centers were open, but for the most part, the stores within were shuttered. It ended up giving all of its tenants rent concessions in an effort to help them muddle through the pandemic challenges.
That said, this trio is not on equal footing. AMC is highly leveraged, short on cash, and desperate to raise money so it can stave off bankruptcy. The CEO recently told a major news outlet that the company needs $750 million to make it through 2021, but that so far it has only managed to raise $200 million. Six Flags is also weighted down by a debt-heavy balance sheet, but it isn’t facing the severe cash crunch AMC is trying to deal with. Tanger is on pretty solid financial ground, in relative terms, given its property-focused business.
The runoff elections for Georgia’s two Senate seats, meanwhile, appear headed to the Democratic contenders. That will give control of the body to the Democrats and likely make it easier for the incoming administration to get its legislative priorities passed. Those priorities will probably include increased stimulus spending. That’s good news for Tanger and its retail tenants, which helps explain the jump in the real estate investment trust’s (REIT) shares. But it could also turn out well for AMC and Six Flags, if people loosen up their pursestrings.
Movie theaters and amusement parks, however, will need a bit more help than an outdoor mall. And that appears to be coming, albeit slowly at the moment, in the form of widespread coronavirus inoculations. Getting enough of the United States’ 330 million residents vaccinated is a logistical nightmare, so it will probably take several quarters before vaccines help shift the pandemic’s direction. That, along with cash flow issues, probably helps to explain why AMC didn’t hold on to its initial gains. However, Six Flags’ seasonal business might actually see some benefit when it opens up in force during the summer months. This is probably why this stock’s gains were stickier.
Politics are tricky, and investors are reacting emotionally right now. There’s really no way to tell what is going to happen on Capitol Hill at this point. What is clear is that AMC remains a troubled company that all but the most aggressive investors should probably avoid. Six Flags is better positioned but still not in the greatest financial health. There are other amusement park owners that might be preferable — perhaps one that has a mouse as a mascot. And while Tanger is likely to muddle through the downturn reasonably well, it could still be a while before the REIT gets its business back on track. That’s not a knock on Tanger — it will simply require a bit of time to replace tenants that closed during the pandemic.
Long-term investors should probably tread with caution and not read too much into a single day’s gains. There’s a deeper story that you need to understand before you commit your hard-won savings to AMC, Six Flags, or Tanger.
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.
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