AMC Stock: Buy or Sell?
$AMC Entertainment (AMC.US)$ AMC is steadily rebounding from the forced shutdown of its business at the pandemic's onset. The international movie theater chain had one of its best weekends since before the outbreak, buoyed by the return of blockbuster films.
This comes on the heels of AMC's rampant overvaluation when meme stock investors piled in and caused the stock price to jump. Given that backdrop, let's consider AMC's prospects, weigh them against its valuation now, and determine if investors should buy or sell.
The magnitude of the harm that the pandemic caused to AMC's business was dramatic. Revenue fell by 77% in 2020 to $1.2 billion from $5.5 billion the year before. Through no fault of its own, it was forced to close its doors to moviegoers for a substantial part of 2020. Since bringing people into movie theaters was responsible for nearly all its sales, cutting off that source was catastrophic.
Fortunately, several effective vaccines against COVID-19 were developed, making people comfortable enough to revisit theaters. AMC's revenue jumped by 103.5% in 2021 to $2.5 billion. However, the boost left AMC's total revenue at less than half the sum in 2019 before the outbreak. It wasn't until the recent weekend of June 9 to June 12 that AMC reported revenue ahead of the comparable time in 2019.
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