Why AMC Entertainment shares soared 2,573% in the first half of 2021
Actions of the cinema giant AMC Entertainment (NYSE: AMC) grew an almost unbelievable 2.573% in the first six months of 2021 according to data from S&P Global Market Intelligence. You could take out two numbers (on each side) and it would still have been a great performance for such a short period of time. The problem is, stock market performance had almost nothing to do with the business performance of the company.
AMC Entertainment has been one of Reddit’s biggest actions, with bulletin board dwellers pushing earnings to absolutely stratospheric levels. All of this, however, is based on emotion and that can change in an instant on Wall Street. On several occasions the stock has fallen sharply and, just in mid-July, the stock is now “only” up about 1,750% for the year. This is not the type of action that will lead to a good night’s sleep for conservative investors.
Image source: Getty Images.
What is more troubling is that all price movements have very little to do with the underlying activity, which remains troubled. For example, first quarter revenue was down 84% year-on-year. The loss per share fell from $ 2.22 in the first quarter of 2020 to a loss of $ 1.42 per share in the first quarter of 2021, but it’s still pretty terrible. And, thanks to the rally led by Reddit, AMC was able to issue new shares with virtual abandonment, increasing the average number of shares from around 100 million shares at the end of the first quarter in 2020 to over 400 million in 2021., these moves suggest that AMC is in trouble and in desperate need of the money.
Last weekend’s headlines trumpeted “record” numbers for Walt disney‘s Black Widow, but that’s only true if you look at post-pandemic ticket sales. In any other period, participation in this blockbuster would probably have been considered modest. But, in particular, Disney generated $ 60 million (nearly 30% of the global box office) from sales of its Disney + service. This is a game-changer for theater operators, as Disney must share the revenue from theater tickets, but not the revenue from its streaming service. In other words, long-term investors need to tread very carefully on this Reddit favorite, as things are far from back to normal and may never get there at all, despite the current much higher price tag. to pre-pandemic levels.
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Reuben Gregg Brewer has no position in the stocks mentioned. The Motley Fool owns shares and recommends Walt Disney. The Motley Fool has a disclosure policy.
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