Are you sure you want to short sell AMC Entertainment shares right now?


Find someone who looks you the right way AMC Entertainment Holdings (NYSE: AMC) CEO Adam Aron examines box office receipts. The colorful coxswain of the country’s leading multiplex operator woke up to cheerleader pom poms on Monday, tweeting that domestic ticket sales for the industry had just hit their best 14-day count since February of the year last.

We are once again approaching the pre-pandemic public. The $ 109.1 million in box office receipts over the weekend for the Top 10 films are only 16% behind the same weekend in October 2019. The softening of the number of COVID-19 cases help, but the real catalyst here is that Hollywood is ready to trust the local multiplex again.

Image source: Getty Images.

Return to the cinema

The three weekends of October had a new major release:

  • October 1st : Venom: let there be carnage.
  • October 8: No time to die.
  • October 15: Halloween kills.

Carnage? To die? Kill ? It is the industry that is killing him right now.

Cadence matters. When Shang-Chi and the legend of the ten rings set a new Labor Day holiday weekend record last month, it was a title bigger than history. Labor Day has historically been a sleepy weekend for exhibitors, as studios tend to release their most promising potential blockbusters earlier in the summer.

It was not good to see the film stay on top for the whole month of september. This meant there wasn’t enough fresh content to bring customers back to the big screen. As cheerful as the bar’s opening weekend may seem, AMC stock fell 19% last month. In October, AMC and other movie stocks are up, and the good list of earnings could keep the hikes coming.

AMC stock will be volatile. The bears will be quick to point out the obvious valuation issues. Aron may be saying the industry’s recent ticket sales are almost at the same level as 20 months ago, but the price is considerably higher. The stock is trading almost six times more than in mid-February of last year, and with the outstanding shares quintupled during that time, we are looking at a market cap that is 30 times what it was 20 months ago.

The bullish counter is that market sentiment and momentum has clearly turned since the frantic early days of the pandemic. We’re not just talking about Aron bringing together millions of retail investors, making AMC share ownership a badge of honor. AMC itself has taken steps to improve its operations. Seeing this weekend’s ticket sales for national screenings across all channels are just 16% lower than they were two years ago doesn’t mean AMC’s own sales are down greatly. He gained market share during the truce. It has remained open as its biggest rival closed for a second time late last year.

Ticket sales are also just a lever at AMC’s disposal. Improved snack offerings and adoption of mobile ordering across the chain are driving sales at high-margin concession stands. Food and beverage revenue per customer at AMC’s US theaters has climbed 42% in the past two years. The channel is not just gaining market share at the box office. Per capita spending is also increasing dramatically.

Is that enough to justify a 30-fold jump in market capitalization since the last time ticket sales were this high? Before you answer, consider that the starting line might be tainted, as the stock itself was also oversold at the time. The fourth quarter started off with a bang for multiplex operators in general and AMC in particular. Pass the popcorn.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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