Did AMC Just Warn Us That Movie Theaters Are Dead?

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Shares of AMC Entertainment AMC tanked on Wednesday after the movie theater chain suggested bad box office numbers will lead to weak second-quarter earnings, and this word of warning brought the rest of the movie industry lower as well.

AMC plummeted 26% on Wednesday, hitting a new all-time low in the process. The movie theater chain's new full-year 2017 guidance projects a net loss of $150 million to $125 million, which would equal a loss per diluted share of $1.17 to $0.97. AMC is currently a Zacks Rank #4 (Sell).

What has the rest of the movie industry so scared is the fact that the company cited rough box office numbers as a big reason for the new, less-than stellar guidance. AMC reported that U.S. box office revenue dropped 4.4% year-over-year, while overall North American box office revenue fell 3.3%.

Shares of the biggest movie theater chains and moving making giants dropped on the back of the news.

Movie Theater Industry

After missing Zacks Consensus Estimates for second-quarter earnings and revenues last week, shares of Regal Entertainment RGC dipped. Today, the movie theater chain's stock fell 4.64% and hit its 52-week intraday low at $18 per share. Regal Entertainment is currently a Zacks Rank #5 (Strong Sell).

Imax IMAX reported second-quarter earnings that beat our estimates, but its earnings actually fell 11.11% year-over-year. The company missed revenue expectations, with overall theater business revenue down 15.76% from the year-ago period.

IMAX plummeted 11% on Wednesday, hitting a new 52-week intraday trading low at $19.33 per share. Imax is currently a Zacks Rank #3 (Hold) and scored a "D" for Value and an "F" for Momentum in our Style Score system.

Cinemark CNK , which is set to report its second-quarter earning on Friday, fell 5.72% to hover just above its 52-week low. Cinemark is currently a Zacks Rank #4 (Sell).

Movie Maker Stocks

The Walt Disney Company DIS and Sony ADR both fell over 2%. Twenty-First Century Fox FOXA , which owns 20 th Century Fox Studios, and Comcast CMCSA , which owns Universal Pictures, both dipped around 1%.

Viacom VIA , owner of Paramount Pictures, fell 3.64%, just one day before it reports its third-quarter earnings. Time Warner, TWX which owns Warner Bros, seemed to be immune to the downturn and saw a marginal gain to rest less than $1 below its 52-week high.

Overall, however, the PowerShares Dynamic Media Portfolio ETF PBS , which tracks the entertainment world, dropped 2.03%.

Alarming Industry Trends

According to a Motion Picture Association of America report , 2016 global box office receipts totaled $38.6 billion, which marked a 1% increase year-over-year. In the U.S. and Canada, the figured climbed 2% to a total of $11.4 billion. However, international box office revenue declined for the first time in over a decade.

International markets accounted for almost 71% of the global box office in 2016, up from 63% ten years ago. The biggest reason for the fall off overseas was China's sudden pullback after a period of sustained growth.

Overall admissions totaled 1.32 billion, which was down from 1.4 billion a decade ago. The strength of the 2016 box office was boosted by several massive movies, as the top-20 films accounted for nearly 50% of the 2016 domestic box office.

Based on the figures in the MPAA annual report, the number of frequent moviegoers-who go to the movies once a month or more and account for 48% of domestic ticket sales-dropped significantly from 2012. For example, in 2012, there were 9.9 million frequent moviegoers in the 25 to 39 age group. In 2016, there were just 8 million.

Any Positives?

The average cost of a movie ticket in North America hit a record high of $8.95 in the second quarter of 2017 . High ticket prices help keep overall box office sales up, and in terms of entrainment outside of the home, movies are very competitively priced-adjusted for inflation; going to the movies is cheaper than it was in 1977.

Compared to going to a major American sporting event, movie tickets are actually affordable. It cost $34.60 for a family of four to go to the movies in 2016. Attending an NFL game ran $371.92, while going to a ballpark cost $124.00 on average.

On top of this, movie theater chains are now slowly adding adult beverages and better food options in an effort to attract more customers.

However, movie studios will need to address the streaming and on-demand problem that has helped bring down the total number of people going to theaters. As box office numbers fell last quarter, Netflix added 5.2 Million new users .

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Time Warner Inc. (TWX): Free Stock Analysis Report

Walt Disney Company (The) (DIS): Free Stock Analysis Report

Comcast Corporation (CMCSA): Free Stock Analysis Report

PWRSH-DYN MEDIA (PBS): ETF Research Reports

Regal Entertainment Group (RGC): Free Stock Analysis Report

Cinemark Holdings Inc (CNK): Free Stock Analysis Report

AMC Entertainment Holdings, Inc. (AMC): Free Stock Analysis Report

Twenty-First Century Fox, Inc. (FOXA): Free Stock Analysis Report

Imax Corporation (IMAX): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks
Referenced Symbols: DIS , VIA , CMCSA , PBS

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