AMC Entertainment Holdings (NYSE: AMC) has constantly been in the news as one of the premier meme stocks. Despite being down by more than 50% from its peak in early June, the stock continues to have a nearly 1,500% gain.
Of course, the stock has defied all sorts of traditional valuation measures as it's nowhere near earning a profit. Additionally, it was struggling to survive even before the pandemic as fewer people were going to theaters. The company has been able to use its inflated stock price to restock its cash reserves which should give it a longer lifeline, but there still remains existential questions about its ability to survive. And, it remains significantly overvalued relative to other movie theatre stocks.
Inside the Numbers
Given this dynamic, it's not surprising that earnings season would be highly anticipated. The company did slightly top expectations and show significant improvements on a year-over-year basis. EPS for Q2 came in at a loss of $0.71 per share which topped analysts' estimates of a loss of $0.91 per share. 2020's Q2 was the worst of the shutdowns when the majority of theatres were closed resulting in a loss of $5.81 per share.
Revenue also beat at $444.7 million vs expectations of $383 million and a 2,250% increase from last year's Q2. The stock price initially gapped up following the beat but quickly gave up these gains to finish red as the company's long-term outlook remains bleak.
In 2019, the company lost $150 million in revenue and had a market cap of $750 million. Today, it's losing much more money, has taken on significant amounts of debt, diluted shares through issuance, and has a market cap of $17 billion. Currently, the company has about $1.3 billion in cash which means that the clock is ticking on its turnaround.
Stock Price Outlook
Even if someone is bullish on a resurrection of people going to movie theaters, there are much better opportunities than AMC given its overvaluation. However, there are reasons to believe that moviegoing may become a relic like so many activities.
Every streaming service has grown by massive amounts during the coronavirus. They are now directly releasing movies to the platform which means at least a portion of the population will simply watch at home. Finally, the at-home viewing experience is superior to watching movies in theater given the convenience, cost, and improved audio and visual experience.