AMC Entertainment Holdings recently reported impressive earnings, proving that the movie theater company could leave its meme stock past behind it.
AMC (ticker: AMC) was first given its meme-stock status about two years ago, when retail traders on Reddit threads encouraged the purchase of shares while institutional investors were trying to short the beaten-down stock. AMC’s short interest as a percentage of its float was 56.8% in January 2020, according to Dow Jones Market Data.
The stock went on a wild ride as meme traders squeezed short sellers. Shares of AMC hit their high of $34.83 in 2021, but have since come back down to earth, trading around $5 on Wednesday.
In the past few years, AMC has struggled with people returning to movies following pandemic lockdowns and competition with streaming services. Investors have recently been focused on the return to theaters, and the company’s ability to convert its so-called APE preferred shares into common shares to raise equity.
But recent news surrounding the company paints a potentially brighter future ahead. AMC reported a strong second quarter after the close Tuesday, surprising Wall Street with a per-share profit, year-over-year revenue growth, and its highest quarterly attendance since 2019.
“Q2:23 domestic box office ended up 15% year-over-year driven by the outperformance of a few titles early in the quarter, most significantly Super Mario Bros,” Wedbush analyst Alicia Reese wrote in a research note Wednesday.
Concession sales also helped push revenue higher. AMC reported food and beverage revenue of $7.36 per patron, an increase from last year’s $6.71 and within one cent of the company’s record high.
“Management appears interested in increasing food and beverage variety as well as alcohol sales in geographies that previously restricted such sales to take advantage of concessions momentum,” wrote Barrington Research analyst James Goss, who rates the stock as Market Perform without a price target.
This strong sales performance should continue, as blockbuster hits like Barbie and Oppenheimer helped AMC hit its highest monthly revenue ever in July.
“We estimate that box office revenues per screen for AMC recovered to ~93% of 2Q19 levels vs. an industry recovery to ~82% of 2Q19 levels,” B. Riley analyst Eric Wold, who rates the stock as Neutral with a $4.50 price target, wrote in a research note. “In our opinion, this is most reflective of the positive shift in moviegoer preferences toward large-format, premium experiences and the opportunity for dominating theater circuits to take and retain share.”
However, there are risks to the future of the business, including strikes from Hollywood writers and actors, as well as the continuing legal case over AMC converting its APE shares into common stock.
“What may not be clear to AMC’s shareholders is that if the company is unable to convert APE shares, AMC will be forced to issue significantly more APE shares to cover its upcoming cash requirements. This will result in significantly more dilution for the company’s overall outstanding share count,” Reese added. She rates the stock as Underperform with a $2 price target.
If moviegoers continue to flood theaters, and if AMC can convert its APE shares, investors might stop treating it as an at-risk meme stock altogether.
