AMC Entertainment Stock Regains Momentum: But Is It Sustainable?
One of the notable gainers on Tuesday was the AMC Entertainment Holdings Inc (NYSE:AMC) and although there was no material news about the company, it had managed to deliver gains of as much as 9% yesterday.
Usually, when a stock rises due to no news, investors tend to ignore the rise altogether but there might be one thing that might be the reason behind the rally in the AMC stock on Tuesday. It has emerged that theatres could soon be returning to normal operations and it goes without saying that it is a major boost for a company like AMC.
Recently, it was announced that the film Tenet was going to hit theatres in the fall. The coronavirus pandemic has come as a major blow to many businesses and so was the case with movie theatres. As social distancing rules came into effect in order to stop the spread of the coronavirus, venues like movie theatres went off-limits.
That created a major problem for companies like AMC which operate movie theatres. While the Tenet announcement is a big boost for AMC, it should be noted that the coronavirus risks have not gone away completely. Cases are still being reported and if strict social distancing guidelines are introduced again, then movie theatres will be off-limits yet again.
Push Back Reopening Date Again
This has caused another problem for the movie industry. If movie theatres are off-limits, then there is no point in producing new movies either and that became amply clear with the fate of the Disney film Onward. Although the film got good reviews and audiences generally liked it, it ended up as the worst-performing film from the Pixar stable in history. Movie theatres had been closed down some days after the film was released and that put paid to its chances of any kind of success.
Hence, a second wave and the restoration of the strict guidelines are major concerns for both theatres as well as movie studios. If studios don’t take the risk of actually bankrolling a film, then theatres would not have anything to show.
That being said, it could change and the announcement of the film Tenet could be the start of the green lighting of several projects from studios. The film is scheduled to be released in the global markets on August 26. In the United States, it is going to be released in a selected group of theatres on September 3.
While there are certain risks, it should be noted that any possibility of recovery in the theatre business is good news for AMC and hence, rally in the stock is perhaps understandable. That being said, the company needs the movie production business to get back to top great as well if it is to return to its old self.
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