There has been tons of drama with AMC Entertainment (AMC) so far this year. You can also mix in quite a bit of both comedy and suspense. And I’m not talking about what’s being shown in its movie theaters. The company, along with GameStop (GME), has been the target of a social media movement where heavily-shorted stocks have seen massive gains and subsequent declines.
AMC shares have been part of the recent frenzy in heavily shorted stocks, sending its shares — at one point — surging some 300% in a span of one week only to lose those gains a few days later. But when blocking out all the Reddit-related noise and focus on AMC’s fundamentals, some interesting things come to light. The movie theater chain is set to report fourth quarter fiscal 2020 earnings results after the closing bell Wednesday. Dare I say, “get your popcorn ready.”
There’s reason to believe that AMC will have better chances of success this year as vaccine rollouts accelerates. For example, due to the pandemic, movie ticket revenues last year plunged 82% to $2.1 billion. What’s more, as of the Q3 the company’s adjusted free cash flow was negative $372 million, putting its adjusted free cash flow at negative $837 million for the three quarters of the year.
But it stands to reason that AMC’s revenue prospects should improve each quarter of fiscal 2021 with reduced social distance restrictions across many states due to vaccine availability. What’s more, the company has enacted several capital raises which has greatly reduced the risk of near-term bankruptcy. Nevertheless, on Wednesday the market will want to see whether the company has staying power, particularly as streaming giants begin to release movies directly from their platforms.
For the three months that ended January, Wall Street expects the Leawood, KS-based company to lose $3.21 per share on revenue of $156.3 million. This compares to the year-ago quarter when it lost 13 cents per share on revenue of $1.45 billion. For the full year, the loss is projected to be $38.64 per share, compared to the loss of $1.44 a year ago, while full-year revenue is projected to decline 77.4% year over year to $1.24 billion.
Amid the coronavirus-induced devastation in leisure and entertainment, AMC has suffered massive losses in the past three quarters. With AMC's attendance down 92% and 90% in January and February, respectively, the market is assessing the economics of the business, along with the long-term sustainability of movie theaters. Even more critical is the fact that movie studios have begun to release blockbuster hits direct to consumers using their streaming platforms.
Both Disney (DIS) with its Disney+ and WarnerMedia’s HBO Max have demonstrated that the elimination of the theatrical exclusive release window has been a hit with customers and is a catalyst to drive more subscriptions. However, there is evidence that there is still strong pent-up demand for those who prefer the movie theater experience. China, for example, is seeing record turnout.
Opportunistic investors are looking for a reason to believe that AMC can be an investment blockbuster in 2021. And the likelihood that theaters will eventually re-open with fewer capacity restrictions plays into that narrative. On Wednesday that, among other things, this topic will be what the management of the company must broadcast to the market.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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