AMC Entertainment reported its long-awaited Q2 results, and investors are rewarding the stock. Shares of AMC rallied more than 3% in the regular session. Since the company’s earnings report was announced, the stock has tacked on another 4%-plus in extended-hours trading. The movie chain’s revenue came in at a stronger than expected USD 444 million as the company benefited from the reopening of the economy.
AMC Tailwinds & Headwinds
AMC’s results were buoyed by the reopening of theaters across the U.S. and internationally. Adam Aron, the company’s CEO, described the quarter as “transformational” thanks largely to “quarter-ending liquidity” of more than USD 2 billion, which is about twice its former peak.
Aron believes this cash and credit will help the company get through the pandemic uncertainties. Another potential tailwind is that ticket prices are inching higher and averaging USD 10.90 in the U.S., up 15% vs. pre-COVID-19 levels.
There are headwinds as well. AMC is not a profitable company and reported a loss of USD 344 million for the quarter. Worse, AMC was operating at a loss even prior to the pandemic as movie theaters have had to compete with the rise of streaming content. In addition, AMC is saddled with billions of dollars of debt on its balance sheet, which fuels some of the short interest in the stock.
AMC, however, is a meme stock, meaning that rather than trade on fundamentals, the price is fueled by internet sentiment. That meme-stock quality has seen the AMC price skyrocket as high as USD 70 per share in early June, though the stock is currently trading at about half of that level.
Retail investors hold the lion’s share of AMC shares, as per the CEO. These shareholders were invited to participate in the company’s earnings call, where Aron was prepared to answer some of their questions about the path forward.
AMC is also catching crypto fever and plans to accept bitcoin as a payment method by year-end. Doing so could help to motivate the cryptocurrency community to go to AMC theatres. CEO Adam Aron reportedly discussed the details on the company’s earnings call, saying that AMC is implementing the technology to accept bitcoin payments for tickets and at the concession stand, the latter of which has attractive margins.