The coronavirus pandemic has had a killing effect on many businesses and one of those is the movie theatre business. AMC Entertainment Holdings Inc (NYSE:AMC), the renowned film theatre operator, had also seen its business dwindling down due to the pandemic. However, in recent days, it has been on a highly impressive rally, and on Tuesday it continued as the AMC stock rallied by as much as 23%. The stock has gone up by almost 100% since the beginning of the month.
Change of Sentiments
As theatres all across the United States remained closed for most of the year, the AMC stock plummeted considerably. However, not much has changed with regards to the company’s operations and much of the gains could be put down to a change in investor sentiment about AMC.
Although the company has been given permission to open some of the locations to the public, the level of occupancy has been capped and on top of that, the sanitization costs have also gone up considerably.
Despite the current change in sentiment among investors, it is necessary to keep in mind that in the third quarter, AMC reported that attendance nosedived by as much as 90%. It is a terrible predicament for AMC and it remains to be seen how it recovers from this situation.
However, that is not all. It is also necessary to keep in mind that due to the pandemic and the reluctance of people to venture into film theatres, producers have also become wary of releasing new films.
While the situation may not have improved materially for AMC, there has been a slew of positive news with regards to the development of a coronavirus vaccine. On Monday, it emerged that AstraZeneca has come up with a coronavirus vaccine.
The news comes close on the heels of similar announcements from Pfizer and Moderna. Hence, it is possible that investors now believe that the COVID 19 spread can in fact be controlled and before long normalcy could return.
In that case, companies like AMC, which are dependent on discretionary spending, could benefit and that could be the main rationale behind the remarkable rally in the company’s stock.
However, these vaccines are yet to be approved and until then AMC is going to continue to struggle to conduct its business. Moreover, there has also been a spike in the number of COVID 19 cases in recent days.
AMC had warned earlier that it could run out of cash this year or early next year. It remains to be seen if normalcy returns before that eventuality and that is why the stock remains a bit of a gamble at this point.
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