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Why AMC Entertainment Is Falling Again Today

Sep 23, 2022

What happened

Shares of AMC Entertainment (AMC -10.28%) were down by 7.8% to $10.68 at 12:20 p.m. ET Tuesday, on no news specific to the company. Instead, they appeared to be following a pattern that has played out many times over the past year.

The movie theater operator has seen its stock rally numerous times lately. For example, it popped after management announced it was investing in a defunct gold and silver miner, Hycroft Mining (HYMC -6.87%), and did again more recently after the company took a near-7% stake in National CineMedia (NCMI -8.26%), an advertising outfit for movie theaters. But always in the aftermath, the stock has fallen to levels far lower than where it was trading before the news.

On Tuesday, AMC shares are trading more than 20% below where they were in mid-March, when the cinema owner said it had taken a 22% ownership interest in Hycroft. 

Moviegoers wearing 3D glasses.

Image source: Getty Images.

So what

AMC Entertainment posted decent first-quarter results two weeks ago, but its losses were still significant even if the $0.52 per share loss was better than the $0.63 per share loss Wall Street was expecting. The market's continuous downward pressure on the stock suggests there's a belief the theater operator should be tending to its knitting rather than putting its cash into external investments.

In the current environment of high inflation and rising interest rates, consumer discretionary spending could be severely impacted. When budgets are tight, a night out at the movies for a family of four becomes an expensive proposition, especially when you include a pre-film trip to the concession stand.

Now what

Even though Hollywood has a lineup of big-budget movies scheduled for release over the rest of the year, AMC's financial condition is not looking particularly favorable. Attendance remains below pre-pandemic levels, and the situation for the movie theater stock may not improve anytime soon.

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