It's been a rough road for AMC Entertainment (NYSE:AMC) for the last year or so. Not only did most of its theaters spend large chunks of the last year shut down by coronavirus restrictions, the re-opening has not exactly been great for them so far. With studios pursuing alternate release plans much harder than ever before, the end result has hurt the theater chains badly and given their recovery narratives a lot less to work with.
“Black Widow” Shoots AMC Between the Eyes
The latest news hitting AMC like a comic book assassin's bullet is the two-fold bad news that not only is Disney (NYSE:DIS) delaying the release of its upcoming “Black Widow” to July, but also will be using the simultaneous release strategy again. Disney will be offering up “Black Widow” not only to theaters, but also on Disney+ with an additional fee.
The result not only gives those leery of a return to the theater less reason to return, but also demonstrates that Disney itself may well have had it with the theatrical release model as a whole. This is just the latest such move for Disney; it's also revealed plans to do the same for its May 28 release of “Cruella”, and the upcoming Pixar release of “Luca” will go direct to Disney+, bypassing the theater system entirely. Additionally, “Shang Chi and the Legend of the Ten Rings” will also be delayed from July to September, but that point was already known.
The resulting news about Disney's release schedule hit both Disney and AMC; Disney is down nearly 10 points on the week so far and AMC has lost ground for the last three days as well.
Analyst Sentiment Increasingly In Decline
The news did not sit well with analysts, but then, little AMC news in the last year seems to have sit well with analysts, as based on our latest research. A year ago, the company had two “buy” ratings, seven “hold” and five “sell” to its credit. Six months ago, that slipped just a bit to one “buy”, seven “hold” and five “sell.” A month ago, buyers had left the field altogether, and we were down to six “hold” and four “sell” ratings.
The price target, meanwhile, has seen downright frantic ups and downs. While it spent most of 2020 struggling to clear the $7 mark, briefly hitting $7.02 back in September, there was a brief renaissance for the company as price targets actually hit $19.90 in January. Now, however, reality has reasserted, and the current average price target is down around $3.88 a share. There hasn't been much movement in the price target of late, though, as B.Riley recently posted a target of $7 per share, up from its previous $5.50 per share.
If You Don't Show It, They Won't Come
The problem for AMC is two-fold right now. Not only is there still plenty of hesitation on normal people's parts about going back to the theater, and spending a couple hours or so in a confined space with a lot of people, but even if that weren't the case, there's not a lot to see.
Granted, AMC has been downright frantic in terms of introducing new cleaning policies and new ventilation systems and all the latest in social distancing, but that's likely not going to be enough to fully overcome the months-long drumbeat of death counts that news channels were pumping out around the clock for most of a year. Still, there are clearly plenty of folks longing for a return to normalcy, when you could go more than a couple days without hearing the word “vaccine” on the news, or seeing someone wear a face mask to go into a bank. That's a market ready to be capitalized upon, even if AMC will have plenty of competition from Cinemark (NYSE:CNK) and others waiting to open up as well.
The bigger problem here is Disney's response, and those like it. It's a safe bet that Disney's testing the waters on its own releasing platforms to see just how bad a hit it takes when it bypasses the theater and goes straight to its own streaming options. While streaming does have a lot going for it—it had a lot going for it back in 2019, too—the question is just how big a loss will Disney et al endure as a result? We know how hard “Raya and the Last Dragon” flopped with its release—the movie brought in a disastrous $8 million on its opening weekend—but we don't know how many bought in on Disney+.
If Disney can sustain profitability from film releases online, that spells a disaster for AMC and other theater chains unless they can successfully pivot to some other line of business. A return to the status quo may well happen at some point, but that's going to depend on a lot of information that isn't really being released, or even mentioned. AMC may still be able to pull off a recovery, but keep your eye on this one carefully.
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