AMC Entertainment May Have Just Had Its Final Big Quarter

Embattled theatre chain operator AMC Entertainment (NYSE:AMC) stock has picked up in the past month. A lot had to do with its somewhat encouraging preliminary fourth-quarter results.

It’s now released its final fourth-quarter earnings results, which are nothing to feel joyful about despite showing progress. AMC stock continues to trade at a lofty valuation, and it appears that a potential recovery in its business has already been priced-in.

With an improved showing during the fourth quarter, some investors believed a turn-around was for AMC. Fourth quarters are usually strong for theatre chains, with some big-ticket movie releases usually releasing during the tail-end of the year.

One film in Marvel’s Spider-Man: No Way Home was mainly responsible for the colossal box office sales during the quarter. Therefore, those jumping on the AMC bandwagon should seriously reconsider their positions.

Back With a Bang

AMC posted its blockbuster fourth-quarter results this week, its strongest in the past two years. Its revenues of $1.2 billion during the quarter were spearheaded by the latest iteration of the Spider-Man franchise.

It was an enormous jump from a year ago from $162.5 million. Nearly to 60 million people visited its theaters across the globe during the fourth quarter.

With renewed confidence, CEO Adam Aron shot down the speculation about the trials and tribulations of the industry. He states that the prediction of the business’ naysayers was “a load of cow dung.” At the conclusion of 2021, AMC had 593 domestic and 337 international theatres open, representing more than 95% occupancy.

However, in January, domestic movie ticket sales were back to the repressed levels we have seen over the past couple of years. The pandemic-induced restrictions are now fading away quickly, but customers are still hesitant to go out.

Moreover, it’s tough to predict whether the upcoming titles can have the monster success Spider-Man ended up having. To put things in perspective, it’s the sixth-highest grossing film in history. Therefore, expect more of the same with AMC for the foreseeable future.

The Disney Effect

With the mind-boggling success of Spider-Man, Disney (NYSE:DIS) has yet again shown how important it is for the theatre business.

Its films accounted for roughly 30% of the U.S. theatre gross revenue last year and have been posting such numbers consistently over the past several years. It has a content gold mine that has captured cinema-goers’ imaginations for years and continues to have a significant effect.

Content producers are shifting their business models towards streaming during the pandemic years, though. Several of the top studios are releasing films on their respective OTT platforms and are gaining immense traction.

Still, as former Disney Acquisition’s Head Bob Iger puts it, “movie theaters as an experience won’t go away.” The success of the small screen cannot be denied, though, and movie ticket prices concerning the value of streaming subscriptions are at a major risk.

Therefore, it’s a concern for Disney but perhaps more for AMC. The former will have its ways of making truckloads of cash through its theme parks, streaming business, and whatnot. However, AMC will be left crippled without the Disney push.

Bottomline on AMC Stock

AMC is in a better position than a year ago, but its stock trades at a far higher market cap than what it enjoyed during the good ol’ days.

Even before the coronavirus swept away proceedings, the movie theater chain was hardly profitable. Additionally, with the rise of streaming services, it’s tough to see how AMC can bounce back anytime soon.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.