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2021-04-21

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The False Narratives Surrounding AMC Entertainment

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To be clear, I don’t subscribe to that case. But as with nearly every stock out there, a reasonable investor can make a case for being long.\nThe end of the novel coronavirus pandemic should boost the company’s revenue after an abysmal 2020. Bulls believe that the “death of the movie theater” narrative amid the explosion of streaming services such asNetflix(NASDAQ:NFLX) is overwrought.\nThere’s even the possibility of a long-termbenefitto the business from the pandemic on the competitive front. Smaller, less-capitalized theatres have gone out of business for good. Just in Los Angeles, permanent closures have taken some300 screens out of circulation.\nIndeed, earlier this month one analystupgraded AMC stock. He argued that the performance ofGodzilla vs. Kongshows significant pent-up demand for in-theatre viewing, and bodes well for AMC’s recovery going forward. Indeed, if, thanks to competitor closures, AMC can capture more of that demand in a less-supplied market, there’s an argument for further upside in the stock.\nAgain, I don’t subscribe to that bull case. But I’ll grant that it’s reasonable. And I’ll grant that, like every investor, I’ve been wrong before and will be wrong again.\nBut if you’re going to own AMC stock, you need a real thesis. Too many bull cases of late lack that thesis, with many based on three particularly faulty narratives.\nWhere Was WSB?\nThe narrative around AMC stock is usually entangled with the short sellers in the stock. In late January, AMC rallied along withGameStop(NYSE:GME) on hopes of a so-called “short squeeze.” Since then, it hasn’t been hard to find vitriolic comments about “the shorts” and their menace to AMC and other stocks. And we’ve seen AMC stockholders hailed as something close to heroes for saving the company from the evil shorts.\nIt’s too difficult at this point (and at the least would take too long) to disabuse some of the beliefs around short sellers as a whole. So let’s focus on how that narrative fails for AMC stock itself.\nFirst, AMC shareholders aren’t “saving” the company. If anything, they were late to the party.\nSee, for instance, this Tweet which claimed the January rally allowed the companyto raise $900 millionand got over 16,000 likes. In fact, the capital raises came before the“Reddit rally,”and sent AMC stock to an all-time low.\nAMC needed a higher share price during the pandemic, when it was facing real risk of bankruptcy. WallStreetBets was nowhere to be found.\nThe Short Squeeze in AMC Stock\nSecond, a short squeeze is not an investing thesis. It’s a trading thesis. In fact, we’ve already seen this in AMC stock.\nIf you believe that the January rally was a short squeeze (and I’ve argued it was in fact a“gamma squeeze”), what happened afterward? AMC stock plunged. It’s still down more than 50% from the highs.\nThat’s not a surprise. That’s literally how it works.\nShorts are forced to cover atartificiallyhigh prices. Once they do so, there are no buyers left at the highs. And the stock falls.\nThat assumes another squeeze is likely. The data suggests otherwise.\nShort interest in AMC stock as of this writing is about 73 million shares. That’s about 31% of the float — a reasonably high number, admittedly.\nBut short interest is also less than half average daily volume over the past three months. The idea that shorts are going to get “trapped” amid so much volume thus seems like a pipe dream.\nEven if it does happen, the point is to get out at the top. It’s to sell at $20 in January — not to own at $9 in April. Long-term investors who truly believe in AMC shouldn’t be hoping for a short squeeze. They should be hoping for a lower price to boost returns over time.\nThe Pandemic Problem\nFinally, there’s a narrative that AMC stock is going to rise because AMC’s results are going to improve.\nThat improvement is unquestionably coming. Revenue declined 77% year-over-year in 2020, obviously driven by closures due to the novel coronavirus pandemic.\nBut AMC stock is pricing in a lot of improvement, and not just because it’s rallied 336% so far this year.\nGo back to the end of 2019. AMC had 104 million shares outstanding (roughly split between Class A and Class B). It closed the year with a stock price of $7.24, for a market capitalization around $750 million. Adddebt net of cashof $4.49 billion, and AMC’s enterprise value was $5.24 billion.\nAs of Mar. 3, AMC had 450.2 million shares outstanding. Its market capitalization thus is $4.35 billion — nearly six times what it was at the end of 2019, obviously before the pandemic arrives. Add in net debt of $5.41 billion&nbsp;and AMC’s enterprise value is now $9.76 billion.\nIncluding debt, AMC’s valuation is nearly 90% higher than it was before the pandemic arrived. In fact, its valuation in 2021 is far higher than it’sever beengoing back to its late 2013 initial public offering.\nSo if an investor argues that the pandemic is going to lead AMC stock higher from here, they have to explain how AMC’s outlook is better in 2021 than it was in, say, 2015. It’s hard to see how that’s the case.\nThe long-term trend of declining movie theater attendance remains. AMC’s debt load is higher, thanks to cash burned last year.\nNetflix has been joined byDisney(NYSE:DIS) andAT&amp;T(NYSE:T), among many others, to launch streaming platforms. Those platforms have driven an explosion in content spend that creates television series that are as good or better than movies.\nAn investor can dispute these points, certainly. At this valuation, they’d better.","source":"lsy1606302653667","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>The False Narratives Surrounding AMC Entertainment</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nThe False Narratives Surrounding AMC Entertainment\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-21 11:43 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://investorplace.com/2021/04/three-false-narratives-surrounding-amc-stock/>InvestorPlace</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nThe oft-told story around AMC stock doesn't match the facts.\n\nThere is a bull case forAMC Entertainment(NYSE:AMC) stock. To be clear, I don’t subscribe to that case. But as with nearly every stock out...\n\n<a href=\"https://investorplace.com/2021/04/three-false-narratives-surrounding-amc-stock/\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"AMC":"AMC院线"},"source_url":"https://investorplace.com/2021/04/three-false-narratives-surrounding-amc-stock/","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1104169549","content_text":"The oft-told story around AMC stock doesn't match the facts.\n\nThere is a bull case forAMC Entertainment(NYSE:AMC) stock. To be clear, I don’t subscribe to that case. But as with nearly every stock out there, a reasonable investor can make a case for being long.\nThe end of the novel coronavirus pandemic should boost the company’s revenue after an abysmal 2020. Bulls believe that the “death of the movie theater” narrative amid the explosion of streaming services such asNetflix(NASDAQ:NFLX) is overwrought.\nThere’s even the possibility of a long-termbenefitto the business from the pandemic on the competitive front. Smaller, less-capitalized theatres have gone out of business for good. Just in Los Angeles, permanent closures have taken some300 screens out of circulation.\nIndeed, earlier this month one analystupgraded AMC stock. He argued that the performance ofGodzilla vs. Kongshows significant pent-up demand for in-theatre viewing, and bodes well for AMC’s recovery going forward. Indeed, if, thanks to competitor closures, AMC can capture more of that demand in a less-supplied market, there’s an argument for further upside in the stock.\nAgain, I don’t subscribe to that bull case. But I’ll grant that it’s reasonable. And I’ll grant that, like every investor, I’ve been wrong before and will be wrong again.\nBut if you’re going to own AMC stock, you need a real thesis. Too many bull cases of late lack that thesis, with many based on three particularly faulty narratives.\nWhere Was WSB?\nThe narrative around AMC stock is usually entangled with the short sellers in the stock. In late January, AMC rallied along withGameStop(NYSE:GME) on hopes of a so-called “short squeeze.” Since then, it hasn’t been hard to find vitriolic comments about “the shorts” and their menace to AMC and other stocks. And we’ve seen AMC stockholders hailed as something close to heroes for saving the company from the evil shorts.\nIt’s too difficult at this point (and at the least would take too long) to disabuse some of the beliefs around short sellers as a whole. So let’s focus on how that narrative fails for AMC stock itself.\nFirst, AMC shareholders aren’t “saving” the company. If anything, they were late to the party.\nSee, for instance, this Tweet which claimed the January rally allowed the companyto raise $900 millionand got over 16,000 likes. In fact, the capital raises came before the“Reddit rally,”and sent AMC stock to an all-time low.\nAMC needed a higher share price during the pandemic, when it was facing real risk of bankruptcy. WallStreetBets was nowhere to be found.\nThe Short Squeeze in AMC Stock\nSecond, a short squeeze is not an investing thesis. It’s a trading thesis. In fact, we’ve already seen this in AMC stock.\nIf you believe that the January rally was a short squeeze (and I’ve argued it was in fact a“gamma squeeze”), what happened afterward? AMC stock plunged. It’s still down more than 50% from the highs.\nThat’s not a surprise. That’s literally how it works.\nShorts are forced to cover atartificiallyhigh prices. Once they do so, there are no buyers left at the highs. And the stock falls.\nThat assumes another squeeze is likely. The data suggests otherwise.\nShort interest in AMC stock as of this writing is about 73 million shares. That’s about 31% of the float — a reasonably high number, admittedly.\nBut short interest is also less than half average daily volume over the past three months. The idea that shorts are going to get “trapped” amid so much volume thus seems like a pipe dream.\nEven if it does happen, the point is to get out at the top. It’s to sell at $20 in January — not to own at $9 in April. Long-term investors who truly believe in AMC shouldn’t be hoping for a short squeeze. They should be hoping for a lower price to boost returns over time.\nThe Pandemic Problem\nFinally, there’s a narrative that AMC stock is going to rise because AMC’s results are going to improve.\nThat improvement is unquestionably coming. Revenue declined 77% year-over-year in 2020, obviously driven by closures due to the novel coronavirus pandemic.\nBut AMC stock is pricing in a lot of improvement, and not just because it’s rallied 336% so far this year.\nGo back to the end of 2019. AMC had 104 million shares outstanding (roughly split between Class A and Class B). It closed the year with a stock price of $7.24, for a market capitalization around $750 million. Adddebt net of cashof $4.49 billion, and AMC’s enterprise value was $5.24 billion.\nAs of Mar. 3, AMC had 450.2 million shares outstanding. Its market capitalization thus is $4.35 billion — nearly six times what it was at the end of 2019, obviously before the pandemic arrives. Add in net debt of $5.41 billion and AMC’s enterprise value is now $9.76 billion.\nIncluding debt, AMC’s valuation is nearly 90% higher than it was before the pandemic arrived. In fact, its valuation in 2021 is far higher than it’sever beengoing back to its late 2013 initial public offering.\nSo if an investor argues that the pandemic is going to lead AMC stock higher from here, they have to explain how AMC’s outlook is better in 2021 than it was in, say, 2015. It’s hard to see how that’s the case.\nThe long-term trend of declining movie theater attendance remains. AMC’s debt load is higher, thanks to cash burned last year.\nNetflix has been joined byDisney(NYSE:DIS) andAT&T(NYSE:T), among many others, to launch streaming platforms. Those platforms have driven an explosion in content spend that creates television series that are as good or better than movies.\nAn investor can dispute these points, certainly. At this valuation, they’d better.","news_type":1},"isVote":1,"tweetType":1,"viewCount":390,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":2,"xxTargetLangEnum":"ORIG"},"commentList":[],"isCommentEnd":true,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/378906978"}