The morning after streaming services dominated the 94th Academy Awards, it was action from a movie theater chain, not
netflix— which jumped 45%.
AMC Entertainment Holdings (teleprinter:
CMA) the stock has been back in the green since the start of the year. Equally crucial, the name is trending on social media sites like Twitter and Reddit. With the help of eager retail investors, CEO Adam Aron is betting on a future for AMC that goes well beyond the big screen.
Earlier this month, Aron caught Wall Street off guard by announcing a $27.9 million investment in
Hycroft Mining (HYMC), which is developing a gold and silver mine in Nevada. The move spooked AMC bondholders, who may view such a move both as a distraction and as a signal that AMC plans to spend its $1.8 billion in cash on acquisitions, rather than to repay its debt.
Aron has been candid about these efforts, saying in the company’s Hycroft announcement that the company is thinking “creatively and boldly about our future.”
“Of course, as the largest movie theater chain in the world, we are passionately committed to orchestrating a full recovery from the impacts of COVID on the movie industry,” he said. “But even with the public’s enthusiasm for going to the movies in our theaters, it’s not enough for us to simply bring back the AMC of yesteryear.”
Beyond Hycroft, the company has started accepting cryptocurrencies, experimenting with non-fungible tokens, and playing popcorn retail. It has also acquired cinemas which it hopes to make profitable. Aron’s comments indicate that more investments are on the way.
It’s no surprise that Aron looks beyond AMC’s core theatrical business. Wedbush analyst Alicia Reese expects the domestic industry box office to rebound to around 80% of pre-pandemic levels this year, reclaiming the remaining ground in 2023. Even assuming AMC’s valuation in the high of its pre-Covid-19 range, its target for the stock price is $7.50, well below Tuesday’s closing level of $29.44.
“We have not yet included AMC’s new businesses in our model, given various unknowns,” Reese said via email. “I think it’s best at this point to allow these companies to generate additional revenue for AMC’s normal business activities.”
Meanwhile, Wall Street consensus estimates call for net losses of $412 million in 2022 and $224 million in 2023, according to FactSet.
Even before the pandemic, industry experts worried about how streaming services would encroach on the exhibition industry. But AMC shares have baffled mainstream analysts and Wall Street watchers for more than a year with pops and dips that seem more tied to broader meme-trading factors like short-seller interest. , options activity and enthusiasm from social media and retail investors.
With the sun shining, Aron is making hay, taking the time to engage and inspire AMC’s base – the stock fans, active on Reddit and Twitter, who call themselves monkeys. These users believe that buying and holding AMC stock will help strangle hedge funds by taking overextended short bets against the company. While this likely won’t translate to box office revenue for AMC, the resulting share price gains have helped the company raise millions of dollars via stock sales. AMC took the opportunity to clean up its balance sheet.
Aron was asked on CNBC on Monday if AMC’s new core competency is “to use the ‘messers’ you have to help turn around a company’s fortunes because they’re willing to put some money into it.” money”.
“I think I have to say the answer to your question is ‘yes’ and we’ve proven it,” Aron replied.
He has a point. Hycroft said it raised approximately $138.6 million through a market share sale program that began after AMC announced its investment. Shares have doubled this week to $2.59.
It is not yet known what other investments Aron is considering. What’s obvious is that AMC will need a few more hits to turn things around.
Write to Connor Smith at [email protected]