Why AMC Leisure Inventory Jumped Monday

What happened

Shares of the cinema operator AMC Entertainment Holdings ((NYSE: AMC) were on the move again this month. The stock pulled back from inexplicable levels in January after the retail crowd bid for shares, which was cheered on by Reddit users. But the stock has regained that momentum lately and is up more than 50% in the last month. Today, as of 1:00 p.m. EDT, stocks are up more than 6%.

so what

A few things have gone to AMC lately. Perhaps most notable to the company itself is the statement by the U.S. Centers for Disease Control and Prevention (CDC) last week that vaccinated individuals are protected from COVID-19 and no longer wear masks even indoors without social distancing have to. That opens cinemas to be fully occupied again. However, a capital increase and possibly increased retailer attraction to AMC stock also added to last month’s earnings.

Image source: Getty Images.

What now

AMC has not yet issued a statement on the new CDC guidelines. Other customer-facing companies have changed mask requirements for vaccinated employees and customers, and some are working on local regulation or enforcement concerns for those who are not vaccinated.

But there is likely to be some catching up to do Watch films in theaters, and this is a first step back to fully enjoy the experience. Also last week, AMC announced that the company had raised an additional $ 428 million in an at-the-money stock offering to further improve its balance sheet.

These positive developments for the long-term recovery of the business should lead more investors to buy AMC shares. And the Reddit crowd might not be done with that meme inventory either. How Bitcoin ((CRYPTO: BTC) It is possible that some of this money will flow back into AMC as well. Long-term investors should be focused on business, however, and there are some positive signs here that the pre-pandemic return to normal is seemingly approaching.

This article represents the opinion of the author who may disagree with the “official” referral position of a Motley Fool Premium Consulting Service. We are colorful! Questioning an investment thesis – including one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.

Why AMC Leisure Inventory Jumped 27% Final Month

What happened

Shares of AMC Entertainment ((NYSE: AMC) rose by 27% last month, according to figures S&P Global Market Intelligence.

The theater operator’s shares rose as theaters reopened, fourth quarter earnings report released, and bullish traders on Reddit plowed into the stock again. It was another volatile month, as the chart below shows, but the stock’s gains in the first half of March were enough to end the month at 27%.

AMC Data from YCharts

so what

AMC shares have soared this year as traders on Reddit’s WallStreetBets board pumped up the stock and traded it along with it GameStop, another favorite of the Reddit crowd. Much of his gains last month came when GameStop stocks rose; The video game retailer ended March up 86%.

Image source: AMC Entertainment.

AMC had some good news to report last month: by March 5, AMC had reopened almost all of its domestic theaters and would soon be reopening in Los Angeles and New York, the two largest markets. The announcement was made during the company’s fourth quarter earnings report on March 10th. As expected, the numbers were gruesome: revenue fell 88% to $ 162.5 million and a net loss of nearly $ 1 billion on generally accepted accounting principles (GAAP) Base. It lost $ 375.7 million based on free cash flow.

However, the stock rose after the report as investors looked to the theaters to reopen, hoping the pent-up demand would propel the company’s rebound.

Later in the month the shares retired as Disney announced that Black Widow and Cruella will be released simultaneously in theaters and on Disney + this summer, showing that the old model of a 75-day cinematic exclusivity window may be dead even after the pandemic ends.

What now

The price of AMC stock is largely backed by traders who seem convinced that the stock can go significantly higher, despite the fact that its fundamentals are utterly terrible. The company has $ 5.7 billion in debt that it pays up to 15% interest on, and the company has diluted shareholders by more than 300% since the pandemic began, which means shareholders now have a much lower entitlement to winnings.

Even the pent-up demand argument seems to be in question after Disney’s announcement. In the near future the Entertainment inventory should continue to move on the whims of day traders, but the company’s poor fundamentals should eventually catch up.

This article represents the opinion of the author who may disagree with the “official” referral position of a Motley Fool Premium Consulting Service. We are colorful! Questioning an investment thesis – including one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.