AMC Entertainment (NYSE:AMC) stock is down 80% in 2022, making it one of the worst-performing U.S. stocks. So what’s behind the decline? Should I include this deteriorating entertainment stock in my portfolio?
AMC is an American movie theater chain. It owns, operates, or has interests in movie theaters located primarily in the United States and Europe.
The company was on the brink of bankruptcy in 2021, but a private investor gave it new life.
AMC has become a so-called meme strain in that it gained viral popularity due to rising social sentiment. Investors flooded the company in May 2021, and the stock skyrocketed from around $10 to he over $50.
Today, the stock is trading at around $5. Considering exchange rate fluctuations, if a year ago he invested £500 in AMC, today he would be just over £100. That’s a terrible return on my investment.
After being bailed out by private investors in 2021, AMC has several plans to pay off debt and raise more capital to invest in acquisitions, theater upgrades, popcorn businesses and even gold mining. devised.
However, the company has struggled to turn a profit in recent quarters. Debt is a big issue here. Debt has reached his $5 billion, nearly double the market cap of the stock.
Much of this debt occurred before the pandemic as it acquired several smaller theater chains and invested in upgrading theater seats and screens.
For now, the company has enough capital to survive the next few years. As of June 30, AMC had more than his $1.17 billion in available liquidity.
Other challenges include the current shortage of blockbuster movies. Analysts have highlighted that the industry has released only four blockbuster movies in the four months leading up to Christmas this year.
By comparison, 2019 had nearly two dozen blockbuster-style movies slated for the calendar. Star Wars: Rise of Skywalkergenerated $177 million in domestic ticket sales in its first weekend alone.
Should I buy AMC stock?
Reports say people are returning to movie theaters, spending more money on tickets and popcorn than they did pre-pandemic. However, the long-term trend is not positive.streaming services such as netflix When disney It will continue to disrupt the film industry.
Personally, there is too much bad news surrounding this company to buy it for me. Combined, my short-term forecasts are pretty bleak.
Some people will say you can’t recreate the movie experience at home, but personally I haven’t had to go to the cinema in years.
In fact, when I started writing this, I searched the movie theaters nearby to see if there was anything I wanted to see.apart from Avatar 2Everyman Chelsea seems to mainly show old movies die hard When love actuallyAvatar 2 might be interesting, but it’s over 3 hours long!
For this reason I did not purchase. And I don’t see the situation getting any better.
Post If you had invested £500 in AMC Entertainment shares a year ago, your current investment would be: It first appeared on The Motley Fool UK.
James Fox has no positions in any of the stocks mentioned. The Motley Fool has no positions in any of the shares mentioned. The views expressed about the companies mentioned in this article are those of the author and may differ from official recommendations on subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering diverse insights makes us better investors.
Motley Fool UK 2022