AMC debuts The Batman as pandemic woes cool. Should you buy the stock?
- The Batman started screening exclusively in AMC theaters the same time when it released Q4 results.
- The co-occurrence of the two events signals growth in revenues for AMC in the coming year.
- AMC’s narrow moat makes it a less attractive investment.
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The Batman (2022) was released exclusively through theaters on March 4th. The debut was just in time for AMC Entertainment Holdings, Inc. (NYSE:AMC), which announced its Q4 and annual results on March 3rd. The co-occurrence of two events important to market perception of how AMC performs is important.
AMC reported a -50.63% EBT margin from annual revenues of $2.528 billion. The loss would have been larger had it not been for growth in revenues in Q4. AMC announced that 60 million people visited the theaters in Q4, resulting in the quarter’s revenues of $1.17 billion.
AMC used Q4 performance to signal the market that the future could be bright. The growth happened at the back of Covid-19 devastation, especially in 2020.
The fundamental weakness for AMC is that its competitive advantage is in the theater segment. Other than that, AMC is not in control of how it would rake in revenues. The company relies on Disney, Warner Bros, and other such companies to release movies exclusively through theater. If the moviemakers choose otherwise, the revenue will take a hit. Such a focus does not guarantee stability in cash flows.
AMC Entertainment’s bearish trend continues
AMC share price maintains a bearish trend. The share price of $14.63 slipped below a key support level of $15. The price is expected to remain between $10 and $15 for at least the next quarter. This analysis does not consider AMC an attractive stock despite the expected growth in revenues.
AMC Entertainment is a narrow moat company whose only competitive advantage is its position in the theater sector. The company may report higher revenues in the current period as more people return to theaters. This analysis, however, does not consider AMC as an attractive buy for long-term focused investors as macro factors can dampen stock.