AMC Entertainment Holdings, Inc. (NYSE: AMC)
AMC Entertainment Holdings, Inc. operates as a holding company. The Company, through its subsidiaries, provides theatrical exhibitions, movie screenings, food distribution, online ticket booking, and other related services. AMC Entertainment offers movie theaters worldwide. Founded in 1920, AMC has the largest share of the U.S. theater market, ahead of Regal and Cinemark Theaters. Having recently issued newly minted AMC Preferred Equity (APE) to AMC holders last week, the company has seen an increase in mentions by 100%, prompting investors to look into the company and find out what makes it so popular. Currently, shares of AMC Entertainment trade at $9.60 per share.
Positive Hype
There are numerous reasons why you should consider adding AMC Entertainment to your portfolio, here are some of them.
At its peak, AMC Entertainment said it was collecting an average of more than $12 a ticket for a MoviePass-purchased admission, which is higher than competitors but has led to larger revenue.
The company was closing in on a million members before the pandemic hit, and now that restrictions have eased, it seems like it will see numbers like this once again, very soon.
AMC can make up to 12 movies a month and work with A-List. AMC Stubs A-List charges $20 to $22 a month, letting members catch up to three movies a week, including premium formats that weren't included in MoviePass.
AMC and its fellow exhibitors will have a busier slate of promising releases later this year, with movies already lined up for their premiers post the summer lull.
The company has gotten better at getting customers to spend more on high-margin snacks and beverages, which could help offset losses from poor ticket sales, it has found its patrons are spending 32% more per capita than they did in 2019.
The stock split gives AMC a new way to raise capital, another advantage of the new preferred units is that the move should have smoked out any synthetic or fake shares out in the wild.
Negative Hype
Although AMC Entertainment has recently seen some success in terms of performance, there are still some reasons it might not be the best time to invest in the company. Here are two of them.
AMC can’t technically issue more stock thanks to a cap written into its corporate charter, and current shareholders have already voted down attempts to raise that cap. Instead, each share of normal AMC common stock this week received a share of new preferred stock, which behaves almost exactly like common stock but isn’t covered by the charter cap which in essence dilutes the stock as was unintended.
Although the company survived the pandemic, it lost $117 million in free cash flow in its most recent quarter, and it still has $5.4 billion in debt, which is costing it roughly $320 million in interest expense each year.
Conclusion
Investors already know from last year's boom in stocks like GameStop and AMC Entertainment that meme stocks don't die easily. With theaters making a comeback post the pandemic and the new issuance of preferred stock as well, it seems like AMC is currently in a place to do well, despite concerns about their balance sheet and the stock split.
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