Markets
AMC

Why AMC Entertainment Stock Was Slipping Today

What happened

Shares of AMC Entertainment (NYSE: AMC) were sliding today for the third day in a row, as fears of a potential bankruptcy and a collapse of the movie-theater industry continued to weigh on the stock. Though there were no new updates on the company, its announcement earlier this week that it could run out of cash by the end of the year, and the decision by Regal-parent Cineworld to close down all of its theaters temporarily, continued to pressure the stock.

Meanwhile, a downbeat initial unemployment-claims report and fading hopes for another stimulus package pushed stocks lower and also dimmed the economic picture for AMC, and rising coronavirus cases across much of the country could even force it to close theaters again. The stock closed the session down 6.4%.

The entrance to an AMC multiplex

Image source: AMC Entertainment.

So what

The world's largest movie-theater operator began reopening its facilities in August, but the recovery in business has been weak. AMC said that through Oct. 9, same-theater attendance has been down 85%. Though that may be primarily due to capacity limits at theaters, it underscores the challenges the company faces in mounting a comeback. At a certain point, it's more expensive to operate a theater with low attendance than to shut down the business.

Additionally, the company acknowledged that major movie releases that were being scheduled for the fourth quarter are being delayed until 2021 or redirected to streaming channels, as studios accept the realities of the pandemic.

Finally, coronavirus cases have reached levels not seen since August in the U.S., and health authorities are worried that cases will continue to rise, especially as the weather gets colder. In Europe, the company's second-biggest market, some countries have already reimposed lockdown measures.

Now what

AMC shares are down nearly a third this week, but the entertainment stock could have further to fall, as this remains one of the businesses most threatened by the COVID-19 pandemic. Not only do theaters need customers to be willing to come back, but they also need buy-in from studios, which don't want to screen big-budget movies for empty auditoriums.

With coronavirus cases rising and no end to the pandemic in sight, there could be more tough times ahead for AMC.

10 stocks we like better than AMC Entertainment Holdings
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and AMC Entertainment Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of September 24, 2020

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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

In This Story

AMC

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More