AMC Sell Alert: Prepare to Offload AMC Entertainment Stock Before August 2

Recent movie news bodes well for AMC Entertainment (NYSE:AMC) stock as it reports earnings on Aug. 2. Although it released preliminary results last week, this could be a case of “buy the rumor, sell the news.”

Disney (NYSE:DIS) has three certified movie hits on its hands. Inside Out 2, Despicable Me 4 and now Deadpool & Wolverine have all earned $500 million or more at the box office. 

AMC stock is up 9% already and two of the Disney movies were released too late to help the cinema owner’s results. While there may be some residual benefit down the road for AMC, it won’t be enough to make a difference.

The Magic Returns to the Big Screen

Disney’s Inside Out 2 was a surprise massive hit. It has generated over $1.5 billion in box office receipts and marked the first time in over a year the movie studio was able to claim a success.

Yet it came out in the middle of June and AMC’s quarter ended at the end of the month. While a movie makes most of its money in those first two weeks after release, the rule of thumb is to divide the total by half as receipts are split with theater operators.

Since AMC isn’t the only cinema company, though it is the largest, it wouldn’t even realize the full half that didn’t go to Disney.

Similarly, Despicable Me 4 and Deadpool & Wolverine were released after AMC’s quarter closed. It won’t be until the third quarter that AMC derives any benefit. The latter film, though, looks like it will be a monster.

It already broke several box office records. In just four days it made $236 million domestically and $260.5 million internationally.

Yet if you look at the first half of the 2024 movie lineup, you will see there are very few other movies that come close to being box office gold. Dune: Part 2 made just $282 million domestically but has pulled in $711 million worldwide. It is pretty much downhill from there.

Blockbusters Can’t Save AMC Stock

As I’ve noted previously in relation to last year’s Barbie and Oppenheimer mega hits, movie theaters can’t survive on just two or three blockbusters a year. 

Theater attendance remains well below last year with 17% fewer theater tickets sold. While box office receipts are above 2022 levels, that’s because ticket prices are 2% more expensive than they were (average ticket prices did not increase from 2023).

This is showing up in AMC’s preliminary results. Revenue is down 24% year-over-year to $1.03 billion while it reported a net loss of almost $33 million compared to a near $9 million profit last year. Losses per share of 10 cents were much worse than the 6 cents per share profit a year ago.

Even on a non-GAAP basis, results deteriorated. Adjusted EBITDA was only $29 million this quarter versus $182.5 million last year.

Dwindling Attendance Signals It Is Time to Go

AMC announced the Deadpool & Wolverine movie smashed attendance records for it on its debut.

The theater chain said its AMC and global Odeon theaters “welcomed more than 6 million moviegoers to its theaters from Thursday through Sunday.” It also saw its highest food and beverage revenue for a single weekend since 2019.

Food and beverage is AMC’s second largest revenue source after the box office receipts. Last year it generated $1.67 billion in food and drink sales. It’s why the theater owner can’t survive on a handful of big hits a year.

It needs to draw in moviegoers to bolster its concession stand sales as they generate huge profits margins. Food and beverage operating margins were north of 80% last year.

Because AMC stock is riding higher after the latest Disney movie release, it would be a good time for investors to sell shares. The formal earnings report won’t add anything to it. As there is not much in store for movies hitting the big screen for the rest of the year, it’s best to get out of AMC stock by Aug. 1 if not before.

On the date of publication, Rich Duprey 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.

On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.