The AMC Entertainment (NYSE: AMC) stock price continued its downfall on Monday despite some positive moves in the industry. It slipped by over 2.20% in the pre-market session after falling by 5.4% on Friday.
Altogether, AMC has plummeted by over 62% from its highest point in May as the meme frenzy faltered. Other meme companies that surged in May like GameStop and Clover Health have also suffered a harsh reversal.
Box office sales are rebounding
There have been some important news from AMC and the box office industry. First, there are signs that the industry is booming as some of the most recent releases attracted substantial attention.
The most recent movie to succeed was Inside Out 2, which has sold a record $100 million of tickets in its second week. It has already grossed over $724 million globally, with over $352 million coming from the US and Canada. As a result, analysts believe that the movie will hit over $1 billion in sales soon.
Inside Out 2 success happened after Bad Boys 2 also delivered strong results, selling tickets worth over $56 million in its opening week. Looking ahead, the next top movies to watch in the coming weeks are A Quiet Place and Horizon.
These numbers mean that there is still demand for quality movies, which is a good thing for theatre groups like AMC and Cinemark. Just recently, AMC Theatres noted that it has just recorded its highest attendance this year, with over 3.8 million guests last weekend.
Remember, AMC reported fairly good earnings recently but warned about the potential slowdown in the second quarter. Its results showed that revenue dropped from $954 million in Q1’23 to $951 million in Q1’24. While this was a drop, I believe that it was a sign of demand for a company that has become a fallen angel. It also narrowed its loss to $163 million.
Most analysts believe that attendance will be lower this year than it was in 2023. But estimates are that the growth will return in 2025, when the industry could generate over $10 billion in sales.
AMC is reducing its debt load
AMC stock chart
The other positive is that AMC Entertainment has reduced its mountain of debt. In May, the company exchanged approximately 23.28 million shares for $163.8 million for debt. It also completed its ATM fundraising, raising $250 million.
To be clear: these actions were all dilutive and the company will likely need to issue more shares as more maturities near. This is to be expected for a firm that sits on over $9 billion worth of debt and lease agreements. It is unclear how willing investors will be to accept another dilution when the current 550 million authorisation ends.
Therefore, I suspect that the AMC stock price will remain under pressure in the near term and then rebound later this year. If this happens, it could crash to the crucial support at $3.61, its lowest level on February 6th, which is about 20% below the current level. In the future, however, the AMC share price will likely bounce back.
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