The recovery narrative has done wonders for AMC Entertainment (NYSE:AMC) so far, with the stock up around 400% this year alone. In fact, recent moves have driven AMC stock up still farther, up 13.2% at one point in recent trading. Better yet, the gains have held on into the morning's trading. So what's driving the gains in AMC stock? The answer may not be all that surprising.
Recovery Narratives and AMC Stock Prove a Winning Team
The recent airing of the 2021 Academy Awards likely spurred a little thought in AMC's direction; after all, the 2022 Academy Awards will need fodder, and that means movies are going to have to come out and hit theaters, even though Netflix (NASDAQ:NFLX) ended up cleaning house at the Oscars this year.
After all, the recent trailer for “F9”, the latest installment in the “Fast and the Furious” saga, features Vin Diesel himself narrating in a breathless pitch: “There's nothing like that moment when the lights go down, the projector ignites, and we believe.” Diesel wasn't the only one recently seen promoting theaters; Matthew McConaughey was recently spotted with #TheBigScreenIsBack, a commercial geared toward getting people back to theaters.
Those kinds of pitches have investors believing that there is indeed pent-up demand for big-screen movies, and not the kind of big screen that's found in most living rooms these days. With vaccine take-up rates still fairly brisk, and coronavirus case numbers on the decline in a lot of places, the notion that we'll be able to return to the theaters like we did in 2019 doesn't seem nearly so out of line as it once did.
\With nearly all of AMC's theaters now open, and international locations likely to follow suit in the near-term as Covid-19 vaccines continue to push forward, that pent-up demand may be able to actually burst forth and result in ticket sales, popcorn sales, and movie theaters recovering that old pride-of-place. Throw in continued gains from Reddit—reports suggest that r/AMCstock is up nearly 30,000 members in the last month alone—and the notion of a short-squeeze rally is continuing to gain ground.
What Do Financial Analysts Think About AMC Stock?
Meanwhile, the word from the financial analyst sector, as exemplified by our latest research, is not nearly so bullish as investors may hope. Bearishness has settled in over AMC stock, and the word from the investor pool has been “hold” for the last two years.
A year ago featured some of the strongest bull sentiment for AMC, with three “buy” ratings, six “hold” and five “sell” to its credit. Six months ago, that slipped to just two “buy” ratings, along with five “hold” and five “sell.” Three months ago featured another slip toward bearishness with one “buy” rating, along with five “hold” and four “sell.” Today, it's even more bearish for AMC stock, as we're down to one “buy”, four “hold” and five “sell.”
The consensus price target occupies a fairly narrow range, with an average of $4.22. The current high is $13, while the low is $1, held by two different analysts. It was originally held by MKM Partners, who lowered its rating from “neutral” to “sell” back in February. Loop Capital, meanwhile, reiterated its own “sell” rating on the company about three weeks ago, also with a $1 target. However, the $13 target was also a recent entry, with B. Riley upgrading from “neutral” to “buy” and nearly doubling its original $7 price target to hit the new mark.
Are Movie Theaters Dead? Well, Not Likely....
The problem in a nutshell for movie theaters, and for Hollywood in general, is that theaters weren't exactly doing great before government reaction to coronavirus forcibly shut them down for months at a clip. The theater experience has been in decline for quite some time; while it wasn't quite so noticeable—especially with movies like “Sonic the Hedgehog” pulling in $57 million on its opening weekend in February 2020—it had been on the decline. An article from Business Insider noted that moviegoer numbers hit a record low in North America...and the article was talking about 2014 movie attendance numbers.
All coronavirus closures did was draw attention to an issue that's been in the making for years: movie theater attendance has been on the decline for decades now. It's been a very slow decline, and there is certainly still interest, but that interest has been waning for a long time as home theater alternatives become more viable. Whether it's AMC stock, Cinemark stock (NYSE:CNK), or any other theater's stock, all theaters have been facing a decline. 2020 pulled the rug out from under theaters, but that rug had already been moving for years prior.
Still, for that hard-core crowd of theater-goers, a return to the big screen is likely in the cards. With current releases doing terribly by comparison—Disney's (NYSE:DIS) “Raya and the Last Dragon,” you'll remember, pulled in a puling $8 million, not counting the unreleased Disney+ numbers—any return to even the weakened normal of 2014 will likely be welcome for studios all over. Picking up a few shares of AMC stock may serve as at least a short-term gain for a portfolio, but keep a watchful eye on this one.
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