1 Metric Working in AMC Stock's Favor Right Now

1 Metric Working in AMC Stock’s Favor Right Now

Comparing where AMC Entertainment Holdings (NYSE:AMC) is now to where it was two years ago is a painful exercise after last week’s quarterly update. As great as the year-over-year comparisons were – when all of its U.S. theaters were closed – AMC is nowhere near where it was before the pandemic.

Revenue clocked in 70% below where it was in the second quarter of 2019. Put another way, AMC’s business would have to more than triple from here to get back to where it was just two years ago. The second quarter of 2019 was also the last time AMC cranked out a quarterly profit.

However, one interesting and encouraging metric can be found in the rubble. Dig into the line items, and you’ll find that the $233 million in admissions it rang up in its latest quarter is 74% below where it was two years ago. This may not sound great, but let’s keep going. The $161.5 million in served up in food and beverages in last week’s report is just 67% less than where it was in the second quarter of 2019. This is good news. Let’s break it down.

A good kind of concession speech

Ticket sales are nice, but it’s not where theaters make the lion’s share of their profits. A multiplex chain can’t live off box office receipts alone. Back out the $98.9 million in film exhibition costs from the $233 million in ticket sales that AMC recorded in its latest quarter, and it can’t cover the $205.5 in rent of its cavernous buildings – much less than additional $246.2 million in operating expenses.

The real money in the multiplex game lies in its high-margin concession stands. If you think you’re overpaying for your tub of popcorn and your gargantuan beverage cup, you’re right. It took just $29.5 million in food and beverage costs – not including the labor to serve it up – to produce the $161.5 million that AMC concession stands rang up in its latest quarter. Seeing food and beverage sales hold up better than ticket sales tells you that folks are spending more on the high-margin edibles and drinkables at your local movie house. This is a great thing to see, and it gets better.

When you see that admissions revenue is 74% lower than it was two years ago, that doesn’t mean 74% fewer people are going to the movies these days. The real math is even worse. As AMC points out in its earnings call, the average price for a domestic ticket has risen 15% over the past two years. Fewer patrons are driving the relative improvement in snacks and sodas. In fact, food and beverage revenue per customer at AMC’s stateside locations has risen 42% over the past two years, from $5.58 to $7.91.

This is pretty incredible news. AMC took advantage of the downtime during the pandemic to roll out mobile ordering across its theaters. It has optimized its offerings. It’s paying off.

Will it last? Was it just folks paying for food and beverage items in the springtime to skirt masking rules that required face coverings stay on unless actively consuming concessions? Was it just nostalgic purchases after a year of streaming from home with inferior popcorn? I would like to think AMC is being rewarded for the upgrades it has rolled out in its high-margin food and beverage business over the past two years, and if I’m right, this story will only get better as more guests grow comfortable with a return to the corner multiplex.

Attendance would have to more than quadruple to get back to where it was in 2019. What do you think will happen to already healthy food and beverage sales? Investors are rightfully scared of movie theater stocks these days, but quiet improvements in AMC’s highest-margin business will pay off when you’re ready to come back to see supersized films as you rock in stadium-seating-planted recliner. Don’t forget the popcorn.

AMC’s Stock Rallies on Heels of Blockbuster Weekend

AMC Entertainment shares are rallying 6% on the heels of a good weekend at the box office. The gains couldn’t come soon enough for AMC investors, who have been on a roller coaster ride in August so far. AMC shares started the month at USD 37 only to fall below the USD 30 level on Aug. 4. The stock has been climbing higher since then in fits and starts.

Movie Sales

While AMC has proven to mostly trade on internet sentiment given its status as a meme stock, shares could also be reacting to some positive developments. The film “Free Guy,” which stars Ryan Reynolds, reportedly generated a better than expected USD 28.4 million in North American ticket sales across theatres. On a global scale, the movie brought in more than USD 50 million.

Investors aren’t the only ones celebrating. Reynolds revealed on Twitter that Disney is interested in a “Free Guy” sequel. Disney along with its subsidiary 20th Century Studios are behind the movie.

This content is not available due to your privacy preferences. Update your settings here to see it.

Analysts were anticipating sales of a lesser USD 15 million-17 million on fears that the rise of the delta variant would keep potential moviegoers at home. Clearly, they were wrong, as people put aside their COVID-related fears and ventured out for entertainment in droves.

Movie Theater Bump

AMC could continue to capture more of the ticket sales pie given the dynamics surrounding this particular movie. Steven Frankel, senior research analyst at Colliers Securities, is cited by Barron’s as saying that “Free Guy” will be available in theaters on an exclusive basis for a month and a half prior to making its way onto HBO Max.

Films associated with Disney typically will make their way onto Disney+ sooner, which gives theaters like AMC more competition. Disney decided, however, to give theaters a shot at exclusivity for “Free Guy” along with “Shang-Chi” and the “Legend of the Ten Rings” for a 45-day stretch. Disney CEO Bob Chapek reportedly attributed the decision to “recent signs of increased confidence in moviegoing.”

Story continues

AMC was not the only movie chain stock to benefit. Investors also sent shares of Cinemark Holdings higher, with the stock rising 2% on the day. IMAX shares did not join the rally and instead were down fractionally.

This article was originally posted on FX Empire

More From FXEMPIRE:

Options Traders Continue To Slap The Ask On AMC Entertainment Stock

AMC Entertainment Holdings, Inc (NYSE: AMC) was trading higher for the third day in a row on Monday propelled by a massive second-quarter earnings beat and the theatre chain company’s decision to accept Bitcoin as currency for tickets and concessions.

On Friday, Benzinga reported another short squeeze could be in the works after options traders continued to hammer bullish AMC call contracts. On Monday, AMC was battling to regain support of the 21-day exponential moving average on the daily chart and head north toward an upper resistance level at the $39 level.

Despite the stock smoking short sellers a couple of times already this year, bearish institutions continue to pile into AMC. Of AMC’s 511.4 million share float, the number of shares held short has increased to 85.85 million in July, up from 75.48 the month prior.

The short sellers could be in trouble if the bears continue to win the battle and on Monday bullish options traders continued to purchase call contracts. Together the traders bought over $1.9 million worth of calls with one trader spending over $500,000 on a single order.

See Also: How to Buy AMC Stock Right Now

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays market price for the call or put option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

The AMC Trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

At 10:18 a.m., a trader executed a call sweep at the ask of 205 AMC Entertainment options with a strike price of $31 expiring on Aug. 20. The trade represented a $66,420 bullish bet for which the trader paid $3.24 per option contract.

At 10:34 a.m., a trader executed a call sweep at the ask of 200 AMC Entertainment options with a strike price of $31 expiring on Aug. 20. The trade represented a $73,000 bullish bet for which the trader paid $3.65 per option contract.

At 10:35 a.m., a trader executed a call sweep at the ask of 200 AMC Entertainment options with a strike price of $31 expiring on Aug. 20. The trade represented a $73,000 bullish bet for which the trader paid $3.65 per option contract.

At 10:37 a.m., a trader executed a call sweep at the ask of 317 AMC Entertainment options with a strike price of $34 expiring on Sept. 17. The trade represented a $179,105 bullish bet for which the trader paid $5.65 per option contract.

At 10:37 a.m., a trader executed a call sweep at the ask of 300 AMC Entertainment options with a strike price of $34 expiring on Sept. 17. The trade represented a $171,000 bullish bet for which the trader paid $5.70 per option contract.

At 10:39 a.m., a trader executed a call sweep at the ask of 300 AMC Entertainment options with a strike price of $34 expiring on Sept. 17. The trade represented a $178,500 bullish bet for which the trader paid $5.95 per option contract.

At 10:40 a.m., a trader executed a call sweep at the ask of 300 AMC Entertainment options with a strike price of $50 expiring on Sept. 17. The trade represented a $60,000 bullish bet for which the trader paid $2 per option contract.

At 10:40 a.m., a trader executed a call sweep at the ask of 373 AMC Entertainment options with a strike price of $35 expiring on Sept. 17. The trade represented a $75,719 bullish bet for which the trader paid $2.03 per option contract.

At 10:40 a.m., a trader executed a call sweep at the ask of 301 AMC Entertainment options with a strike price of $50 expiring on Sept. 17. The trade represented a $57,900 bullish bet for which the trader paid $1.91 per option contract.

At 10:47 a.m., a trader executed a call sweep at the ask of 292 AMC Entertainment options with a strike price of $20 expiring on Dec. 17. The trade represented a $540,200 bullish bet for which the trader paid $18.50 per option contract.

At 11:07 a.m., a trader executed a call sweep at the ask of 565 AMC Entertainment options with a strike price of $35 expiring on Aug. 20. The trade represented a $114,130 bullish bet for which the trader paid $2.02 per option contract.

At 11:08 a.m., a trader executed a call sweep at the ask of 448 AMC Entertainment options with a strike price of $35 expiring on Sept. 10. The trade represented a $219,520 bullish bet for which the trader paid $4.90 per option contract.

At 11:08 a.m., a trader executed a call sweep at the ask of 212 AMC Entertainment options with a strike price of $35 expiring on Sept. 10. The trade represented a $103,880 bullish bet for which the trader paid $4.90 per option contract.

AMC Price Action: AMC Entertainment was trading up 5.5% to $35.32 at publication time.

Story continues

See more from Benzinga

© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.