AMC Entertainment (AMC) – Get AMC Entertainment Holdings, Inc.’s report. Class A March was eventful. The movie theater company’s stock closed the month with gains of more than 30%, thanks to the news that the company had acquired a significant stake in a gold mine, along with positive trends in the broader market.
So far in April, AMC has calmed down. Just looking at its valuation, Wall Street was skeptical about the stock’s future.
But we are often opposed to the fallout from Wall Street. So let’s take a half full cup look at AMC.
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1. AMC’s financial statements are in good shape
In March, AMC management announced that the company had enjoyed the best quarter of the past two years. And while the nearly 60 million moviegoers who bought tickets represented just 64% of pre-pandemic levels, the fourth quarter indicated it was only a matter of time before ticket sales returned to normal.
Year-over-year, revenue increased 620% in the fourth quarter. Beverage and food revenue was 87% of pre-pandemic levels, averaging $6.38 per recipient. That’s slightly better than the $4.74 per capita that AMC made in the fourth quarter of 2019.
But perhaps the best news is that AMC posted positive EBITDA, as well as positive operating cash flow. Thanks to the impact of the COVID pandemic on the movie theater business, AMC’s balance sheet has been a major concern.
Of course, AMC has a lot to thank for its loyal shareholders. Because of their stock purchases, management was able to raise just over half a billion dollars in cash to get rid of the specter of bankruptcy.
And now with about $1.8 billion in cash and a flow of cash, AMC no longer has to worry about playing defense. Instead, she can consider growing.
2. AMC management has a long-term growth plan
CEO Adam Aaron has a plan to generate long-term value for AMC and its shareholders. His goal is to reconcile AMC’s high valuation with the company’s fundamentals.
The money raised from AMC’s share price hike was and will be used in three major initiatives:
- Investing in its core business infrastructure, cinemas
- Pay off company debts
- Investing in mergers and acquisitions for the future growth of the company
AMC has already announced its investments in movie theaters, such as the upgrade of premium IMAX and Dolby Cinema screens. The company is also starting NFT programs and accepting payments via cryptocurrency — steps that should appeal to a young, tech-savvy audience.
As for the second objective, AMC is in the process of discussing refinancing its $5 billion debt with various stakeholders to reduce future interest payments.
Finally, thinking about future investments, AMC has bold plans to retail its branded popcorn. It has also invested in gold and silver mining company Hycroft (HYMC), which CEO Adam Aaron sees as a long-term source of profit.
3. AMC has the power of “Meme Stock”
The so-called “smart money” slammed the meme frenzy that began in early 2021. But more than a year later, that trend is still up and has sparked havoc at hedge funds betting on AMC stocks.
Investing in Meme stocks is characterized by retail investors betting on stocks not because of their business fundamentals, but instead to defeat short sellers. AMC has been one of the darlings of the meme and has remained popular on Reddit’s stock trading threads.
Thanks to meme investors, AMC’s shares are back an incredible 1060% since the beginning of last year. Their steadfast optimism in buy-and-hold and demand stocks has rendered AMC’s business fundamentals irrelevant.
At the moment, short interest in AMC is growing — more than 20% of the shares are floating, according to the latest data from Yahoo Finance. So there is a good chance that M investors will spark new short pressure and bring AMC shares back to stratospheric levels.
(Disclaimer: This is not investment advice. The author may long for one or more of the stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not affect editorial content. Thanks for supporting Wall Street memes)