AMC Entertainment (NYSE:AMC) stock suffered a hard fall after the end of the actors’ strike. It fell 20% overnight and was trading at $8.07 per share, a market capitalization of $1.6 billion, before the market opened this morning.
There was also little positive reaction to AMC’s strong third-quarter numbers, an unexpected profit of $12.3 million, 8 cents per share, and revenue of $1.4 billion. Revenue was up 45% from a year ago.
Naturally, CEO Adam Aron chose to look on the bright side of things as he praised the company’s “highest 3rd quarter numbers in AMC’s entire 103-year history.” Aron also cheered the end of the Actors Strike in a post on X, formerly Twitter:
A tentative deal on a three-year contract was reached late on Nov. 8.
Ever After Starts Now
If the third-quarter results can be replicated, AMC could be a cheap stock. But that’s not the way speculators are seeing it as I write this.
Reaching this point has been a plot as twisted as any movie thriller. Aron sold stock to get through the pandemic, even beyond what his bylaws authorized. He publicly cheered on meme stock traders and crypto bros who wound up losing money. He only recently settled lawsuits over his conversion of preferred APE shares into AMC common.
He also innovated. You can buy AMC popcorn at Walmart (NYSE:WMT). Aron tried selling movie merchandise and non-fungible tokens (NFTs). Aron even tried buying a gold mine to keep speculator interest high.
One innovation that will leave a mark was his deal to put a film of Taylor Swift’s Eras tour in AMC theaters, bypassing movie producers. The film has been a hit, buying AMC time while actors and writers continued wrangling with studios.
But major damage has been done to the balance sheet. In the third quarter report, AMC reported $4.77 billion of debt on $8.79 billion of assets. The operating cash of $289 million generated during the quarter does not include the cost of servicing that debt, which could rise if interest rates don’t start falling.
AMC Stock: What Happens Next?
Aron deserves a star on Hollywood’s Walk of Fame for saving AMC. But whether AMC is now a long-term investment after years of it being a speculation is an open question. It’s not a ticket I’m buying.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
