Changes to MoviePass Are a Huge Catalyst for AMC Stock

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After months of cash burn that eventually resulted in service outages due to the company running out of money , MoviePass is finally changing the terms of its movie-going subscription plan. Namely, MoviePass is going from one movie per day for $9.95 a month, to three movies per month for the same price.

That is a big cut in the value prop of MoviePass. But, it also implies that maybe MoviePass will live to see another day. Shares of parent company Helios and Matheson Analytics (NASDAQ: HMNY ) are popping in response.

I understand the pop in HMNY stock. At three movies per month, MoviePass is much more likely to succeed with a $10 price point. But, I think the real winner of the change in MoviePass' structure isn't HMNY. It is movie theater operator AMC (NYSE: AMC ).

AMC has a competing movie-going subscription plan to MoviePass. Called A-List, AMC's movie-going subscription plan includes three movies per week for $19.95 a month (or roughly $1.67 per potential movie). Next to the old MoviePass (one movie per day for $10, or roughly 33 cents per potential movie), AMC A-List's value prop wasn't terribly compelling.

But, next to the new MoviePass (three movies per month for $10, or roughly $3.33 per potential movie), AMC A-List's value prop actually looks a whole lot better than the MoviePass value prop.

Thus, I think this big pivot in the MoviePass business model creates a huge tailwind for AMC stock. Indeed, AMC stock is up in response to the MoviePass news. But, I think this rally is just beginning.

Here's a deeper look.

A-List Is Now A Better Deal Than MoviePass

As a heavy movie-goer, I've been a big fan of AMC A-List over MoviePass for a while now, even when MoviePass was offering one movie a day for $10 a month.

I don't realistically ever see myself going to the movies more than three times per week. Thus, the MoviePass prop of one movie per day seemed like overkill, while the A-List value prop of three movies per week seemed like a reasonable maximum.

Moreover, MoviePass is somewhat of an irritating product to use. The actual purchasing of movie tickets is a somewhat clunky and it's a complicated process that can't be done in advance. The list of restrictions is long, including not being able to watch anything but a basic 2D movie without any frills and not being able to go to certain theaters because they have ended their partnership with MoviePass.

A-List offers a far better, more VIP-like experience. You can buy movie tickets in advance. At some theaters, you have your own VIP line. You get to watch whatever movie on whatever theater screen. Overall, I thought A-List was just a far better experience, and worth the $10 per month increase versus MoviePass.

But, I also understood that some customers would stay on MoviePass because its per-movie cost was so much lower.

Now, though, that is no longer true. The per movie cost of the new MoviePass is roughly $3.33 ($10 per month divided by three movies per month). Meanwhile, the per movie cost of A-List is $1.67 ($20 per month divided by 12 movies per month).

Overall, then, A-List is now superior to MoviePass in every single way, from convenience to economics. As such, the MoviePass change will likely spark an exodus of customers from MoviePass to A-List. That exodus will provide a near-term lift to AMC stock.

AMC Stock Has Room to Run

I don't own AMC stock because the company will get a near-term lift in its subscription business. Instead, I own AMC stock because I see A-List as being the center of a coming golden era for movie theaters.

Subscriptions are the way to do movies. Consumers like it because it makes going to the movies cheaper, and it matches the pricing tactics of at-home entertainment services like Netflix (NASDAQ: NFLX ). As such, subscription movie-going plans will inevitably boost movie theater attendance.

This is already happening. Thanks in large part to MoviePass, movie theater attendance in the U.S. is on track to be up more than 10% this year, versus declines over the past several years. As a result of this big bump in traffic, AMC stock is up nearly 20% year-to-date.

Bigger picture, this is a long-term trend. As movie going morphs into a lower-cost subscription model, movie theater attendance will go from down-tend over the past several years to up-trend over the next several years. Given that AMC is America's largest movie theater operator, AMC stock will be the biggest beneficiary of this reversal in trend.

As such, I think the rally in AMC stock is just getting started. This was a $35 stock not too long ago. I think AMC stock can get back there over the next several years.

Bottom Line on AMC Stock

MoviePass was never sustainable at one movie a day for $10 per month. Now, the service has changed to three movies a month for $10 a month. That makes the MoviePass value prop significantly less attractive than the AMC A-List value prop, and as such, I see this as the beginning of a huge upswing in AMC A-List members.

Big picture: the beginning of this multi-year uptrend is not only in movie theater attendance, but also AMC's subscription movie-going plan. The combination of those two tailwinds will propel AMC stock significantly higher in a multi-year window.

As of this writing, Luke Lango was long AMC.

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The post Changes to MoviePass Are a Huge Catalyst for AMC Stock appeared first on InvestorPlace .

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

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

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