If one movie industry player had a plot line worthy of a Golden Globe award, it might go something like this: AMC Entertainment Holdings Inc. (NYSE:AMC) was knocked to the mat in 2020. The novel coronavirus walloped the price of AMC stock by 71%. But there’s light at the end of the tunnel! The pandemic may be on the ropes! Can AMC mount a triumphant comeback?
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That exactly illustrates what some investors have bet on this year. While $9 per share ranks well below the heady days of AMC stock in 2016, it’s up 333% for 2021. I see two ways to read this. And both have everything to do with popcorn.
Here’s what I mean: There’s a world of difference between standing in line for your kernel fix versus standing at your stove or microwave. True, studying the heretofore unrecognized popcorn sector won’t offer any clues regarding AMC stock. But consumption patterns in general mean everything here.
Let’s say you choose to grab your popcorn at a local AMC once the Covid-19 pandemic eases up for good. If so, you’ll help this Kansas-based company lead the charge back to financial health. Of course, the popcorn will cost you about $400 a bucket (the small one). But as an AMC stock investor, you can feel good about contributing to the hot-buttered bottom line.
Unless your friends and neighbors all grab their Jiffy Pop these days at the supermarket. There, $400 buys you a year’s supply. And, when you get home, some mighty fine streaming entertainment awaits you.
Netflix (NASDAQ:NFLX) broke all kinds of records in 2020. It added close to 16 million subscribers in the first three months and another 10 million in the second quarter. That collective showing gave the company its biggest growth spurt ever.
Depending on how you view it, Netflix either spells death for AMC stock or is basking in a temporary pandemic surge. Some evidence supports the latter. Subscriber growth screeched to a near halt in Q3 of 2020. The 2.2 million new paid subscribers marked its smallest quarterly increase since 2016.
And yet, Netflix is hardly the only game in town. Nintendo (OTCMKTS:NTDOY) killed it on the video game front. Meanwhile, Walt Disney Co. (NYSE:DIS) added its phenomenally successful Disney+ subscription service in 2020. So those holding AMC stock must face the music, whether it’s scored by John Williams or Hans Zimmer or whomever. Point blank: Have consumer viewing habits permanently changed as a result of the pandemic?
To be sure, home-versus-theater is not a mutually exclusive consumer decision. So there is some hope here as AMC pulls into a potentially promising spring. Nor has the company suffered anything close to struggle by way of scandal, mismanagement or missed opportunity.
In fact, CEO Adam Aron has shown some Tinseltown moxie with his script, quoting Winston Churchill’s “Fight Them On The Beaches” speech three times during an analyst call. As relayed by the Hollywood Reporter, he told investors at one point, “We are fighting this virus with all of our smarts and all of our might.”
Yes, but – since when do brains or brawn sway fickle consumers? They want what they want, when they want it. And the conspicuous presence of streaming and Super Mario Kart answers a need in the spot. It’s a synopsis worthy of “The Big Lebowski”: You’ve got an entertainment jones. You don’t feel like changing out of your ratty robe. You pick up the remote. You flop onto a ratty couch. You tune into The Crown or Tiger King. So long as the rug pulls it all together, Dude, life is fabulous.
These sort of lifestyle observations may not make it to the desk of an MBA-level analyst. Certainly, I don’t know the last time someone from a huge investment bank uttered the word “dude” in their analysis of anything. But if you’ve read me with any regularity, you know that’s precisely how I roll. Any parsing of numbers is only as good as the societal or economic context in which you place it. Dude.
The huge, unanswered question is whether movie houses will soon go the way of coast-to-coast drive-ins. If so, I’m sad. Going to movies is a communal event. Your small screen or home theater cannot substitute for it, no matter how many subwoofers you install. But where AMC stock is concerned, I don’t see things getting better – especially when I ponder what bona fide fuel went into its recent surge.
Call it intermission if you like. But as we return to near normalcy in 2021, it remains to be seen whether viewership habits will as well. Pandemic or no, consumers won’t retreat from watching at home. Where it relates to AMC stock, I’m staying put, too.
The Investment Dude has spoken.
On the date of publication, Lou Carlozo held a long position in NFLX.
The post AMC Is a Wait-And-See Play as Streaming Services Dominate appeared first on InvestorPlace.
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