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AMC share price: losses improve but are still rated R

AMC share price - AMC cinema ticket kiosk

Cinemas have borne the brunt of the various lockdowns because of the pandemic, not that you’d know it from the performance of the AMC share price this year.

Record highs and lows for AMC share price

In the last eight months, the AMC share price has gone from a record low of $1.91 to a record high of $72, before falling back to levels close to its previous record peaks back in 2016, when its finances were in much better shape.

AMC Entertainment’s finances were in such a bad state at the end of 2020 that speculation abounded that the company was on the verge of bankruptcy. Bankruptcy was only averted at the end of January 2021 with a $917m cash infusion, with half coming from investors who purchased shares in a stock offering held the month before.

In its last fiscal year, the company lost $4.6bn, and was burning through $125m a month to keep 438 of its US real estate units open, with little or no customers and not many films to show.

Against this backdrop, it's amazing the business has survived at all given the lack of revenue but, as with all things in life, sometimes it pays to be lucky. AMC enjoyed some major good fortune in January that meant it's still around to see Q2 revenues of $444.7m and losses narrowing to $0.71 a share, or $344m.

AMC swept higher by Reddit meme stock short squeeze

This good fortune took the form of getting caught up in the GameStop Reddit meme stock fallout, which saw the AMC share price swept higher in a massive short squeeze. This gave the company a much-needed opportunity to raise the additional capital needed to continue trading.  

With the additional capital to buy itself time, it now has $1.8bn in cash and $2bn in liquidity. The rise in US vaccination rates has also meant many more people have returned to the cinema – 22.1m people in fact, compared to 100,000 a year ago. The performance in Q2 is also a marked improvement on Q1, which saw a loss of $567m on revenues of $148.3m.

It also helps that a lot of the new shareholders come from amongst the so-called Reddit traders, which means the shares seem on a much firmer base now, despite the still high levels of losses. CEO Adam Aron acknowledged this reality, but also was confident that this Hollywood story would have a happy ending.   

AMC still expects to be cash flow negative for at least the next two quarters, and while management will be hoping for an improvement in the second half of the year, with the release of new like the new James Bond film, its biggest problem will be persuading those cinemagoers who used to like an evening out at the cinema to come back.

There’s a lot to be said for streaming on demand, as well as the luxury of the pause button on a 55-inch TV, with no one munching popcorn behind you, or eating a hot dog.

It's certainly been a rollercoaster of a year so far for the AMC share price, and shareholders will be keeping a close eye on the company to see if it's good fortune will hold out. 

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