A blast from the past may provide an opportunity for the future for the world's biggest theater chain, AMC Entertainment.
AMC stock closed Friday up more than 14% just 24 hours after AMC CEO Adam Aron called the last three months “the most challenging quarter in the 100-year history of AMC.” Aron's comment was in relation to the company's second-quarter earnings that saw AMC's revenue plunge to $18.9 million from $1.5 billion a year ago.
The burst in AMC's stock came on the same day a court ruled that movie studios can once again own theaters. The likes of the Walt Disney Company, Comcast-owned Universal Studios or ViacomCBS-owned Paramount Pictures have not been permitted to own local cinemas since a 1948 Supreme Court decision, the United States v. Paramount Pictures, that banned movie makers form from owning the outlets that actually presented the movies.
|AMC||AMC ENTERTAINMENT HOLDINGS INC||8.62||-0.80||-8.49%|
|NCMI||NATIONAL CINEMEDIA INC||4.49||0.00||0.00%|
AMC was not the only cinema chain to see a stock pop Friday. National CineMedia and Imax were up more than 2%; Cinemark Holdings advanced more than 5% and Marcus soared more than 6%.
All the theater chains have been hit hard by the coronavirus pandemic. AMC's stock has dropped more than 34% for the year but has been making moves to offset a loss like Thursday's $561.2 million bloodbath. Last year at this time, AMC scored a profit of $49.4 million.
To weather the pandemic, AMC has reduced between 80% and 90% of its global cash outlays, including renegotiating almost all of its theatre leases globally, and raised $500 million from the issuance of new publicly-traded debt.
"The result of all these actions during the quarter combined with this successful debt restructuring extends our ability, if need be, to weather a hypothetical suspension of all our theatre operations globally into 2021," Aron said.
The game of "will they or won't they?" will likely begin in Hollywood as to whether or not studios would purchase theaters in the wake of the court ruling. Already, Disney owns the El Capitan in the heart of Hollywood. It plays Disney movies only (the Burbank-based studio was not part of the original 1948 decision because it did not own theaters then).
Streaming giant Netflix in the last year has purchased the Paris Theater in New York and the Egyptian Theater in Hollywood. Those deals were in part made to ensure Netflix would have opportunities to exhibit its prestige films and qualify for the Academy Awards.
At this year's Oscars, Netflix nabbed 24 nominations and saw its films win two awards -- Laura Dern for Best Actress in a Supporting Role in "Marriage Story” and “American Factory” won for Best Documentary Feature.
Ironically, Netflix has led the push for more entertainment to move to the home. Couple that trend with COVID-19 concerns, studios already feeling the financial pinch may not be in the market for a company with 1,006 theaters -- the number AMC Entertainment owns around the world.