Shareholders of the American movie theatre chain AMC Entertainment are left with a tough choice to make, whether to continue to hold on to a stock that has been losing value for the better part of a decade or cut losses by selling their shares right away.
Theatre Chain AMC’s Share Price Dropped 73% in the Last 5 Years
AMC Entertainment Holdings, Inc. (NYSE: AMC) is a good stock that lost 70% of its value in the last 12 months. Compare that to AMC’s performance over the previous 5 years, and you will find that its share price dropped by a whopping 73%.
This past week, the stock saw its share price drop by another 21%, resulting in the entertainment giant shedding $628 million in value over 7 days. So what is causing the company to lose so much value? Let us find out whether the long-term decline is driven by AMC’s business economics.
Looking at AMC Entertainment Holdings’ stock performance over the past year, it is apparent that the market for the time being is focused more on revenue and revenue growth. Often times when a company does not generate profits, the market’s expectation is for it to have good revenue growth. Fast revenue growth allows the market to forecast future profits, which in the case of companies like AMC can be huge.
12-Month Revenue Fell 16% Each Year
Over the last five years, AMC Entertainment Holdings has been falling behind its year-on-year revenue by 16% each year, thus signifying a weak pre-profit performance for the brand. During the period, the share price of AMC stocks dropped 12% every year.
What about the returns for shareholders? AMC Entertainment Holdings’ total shareholder return (TSR) suffered a loss of 48% in the 5 years leading up to 2023. TSR is a measure that accounts for the value of cash dividends that was reinvested into the company, and the calculated value of discounted capital raisings and spin-offs.
AMC’s TSR value is not bad compared to its stock price, as it has paid dividends to shareholders.
Company Lost 51% of its Value in the Past Year
2022-23 was a tough year for AMC Entertainment Holdings’ shareholders as the company saw a total loss of 51%, compared to a market gain of a mere 12%. It is not out of the blue for good stocks to underperform over the course of 12 months. But AMC’s performance in the last year may suggest that there are problems brewing with the company’s business strategy. This is pretty evident given that the drop in value of its share price was worse than the annualized loss of 8% over half a decade.
In the latest market trading session, AMC opened at $4.90 and closed at $4.93. This was lower than last day’s closing price of $4.97. With a market cap of $4.25 billion, AMC Entertainment Holdings is one of the largest entertainment and media companies in the United States and the world’s largest cinema chain operator.
On Tuesday, Cineworld Group, the main rival of AMC, announced that it emerged from a Chapter 11 bankruptcy, nearly a year after the company had filed for insolvency. The second largest cinema chain operator said it was able to lower debt and appoint a new management and board of directors.
Ann Sarnoff, the former chairman, and CEO of Warner Bros, has been added to Cineworld’s board, along with four other members, who will now join Chairman Eric Foss and CEO Eduardo Acuna.
Cineworld, which is the owner and operator of Regal, Cinema City, and Planet, filed for Chapter 11 bankruptcy protection in September 2022 to restructure massive debts incurred by the company as a result of the pandemic-related shutdowns, which caused moviegoers to move on to subscription-based platforms like Netflix and Amazon Prime.