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Stock Watch

Will the AMC share price keep rolling after Reddit boost?

AMC share price: the AMC logo in lights on a busy street

In terms of twists and turns, the movement of the AMC share price might have even blockbuster thrillers beaten. After a year in which AMC Entertainment took a huge hit due to the Covid-19 pandemic closures, the cinema chain found itself at the centre of the Gamestop saga, as one of the ‘meme’ stocks that Reddit traders looked to back "to the moon".

This attention boosted the AMC share price, with the stock rising from under $5.00 to just under $20.00 overnight, before dropping again and finding its current level at around $8.00. As AMC releases its Q4 results, what’s in store next for the AMC share price?

Covid-19 horror hits AMC share price

The problems being suffered by the cinema sector were already well documented even before the arrival of the pandemic. The challenges posed by new streaming markets were already making it hard to compete, and the closure of cinemas as a result of the economic lockdowns merely compounded those problems. 

While attention has been focused on the survival of Cineworld here in the UK, AMC Entertainment’s problems are no less serious, with the company' s revenues plunging 90.9% to $119.5m in Q3. While that’s an improvement on the $18.9m of Q2, it needs to be put in the context of the $1.3bn in the same period a year ago. The owner of the Odeon chain and IMAX cinemas posted a net loss of $561m in Q2, and $905.8m in Q3. This compares to a loss of $54.8m a year ago. 

The continued postponement of numerous big-money blockbusters, including the latest James Bond film, No Time to Die, has hit cinema chains, and the AMC share price, hard. This, combined with the decision by Warner Brothers to release its 2021 film slate straight to its streaming platform once again, throws into sharp focus the challenges facing the entire industry, even when theatres can fully reopen and welcome back customers.

AMC’s deal with Universal to shorten the theatrical window to 17 days, with Universal giving the theatre a cut when selling directly to consumers, is helping boost its revenue numbers, but it’s not a silver bullet. 

Gamestop saga offers AMC lifeline

Despite this, the AMC share price has had a huge uplift in recent weeks, back to levels last seen in 2018, before the pandemic. However that’s not because of an improvement in prospects, it's more to do with being caught up in the Reddit/GameStop saga, which saw small investors try to squeeze short sellers out of the market, with the #SaveAMC hashtag trending on several online platforms. 

This AMC share price surge did have one unexpected bonus, as it offered the chain the opportunity to raise another $304.8m by selling stock in January. This brought the total raised since December to $917m, which helps buy the business more time, as we look towards an economic reopening towards the end of Q2. Expectations are for a loss of $4.09 a share.

AMC Entertainment announces its Q4 results after market close on Wednesday 10 March. What will the latest release mean for the AMC share price?

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