AMC Stock Analysis: Is Wall Street Right to Be Bullish on AMC Entertainment?

Investors in AMC Entertainment (NYSE:AMC) stock received a welcome surprise from the movie theater operator after it released first-quarter earnings that impressed more than one analyst.

Coupled with the revival of meme stock trading enthusiasm and AMC stock has kept a lot of the gains it has made over the past month. With the potential for a few summer blockbusters to hit the theaters in the coming weeks, there is potential for a repeat performance when AMC Entertainment releases earnings in August.

Has the long-suffering theater operator turned the corner? Or are investors bound to be disappointed once again? Let’s find out!

Surprising Strength Amid Losses

Revenue was down year-over-year to $951 million from $954 million last year and AMC narrowed its net losses to $163 million from $235 million. Certainly an improvement but triple-digit losses are never much to get excited over.

Yet as my colleague William White detailed, B. Riley analyst Eric Wold thought the theater chain was putting together a solid performance to build upon. While he remains neutral on the stock, he has a rather exuberant $8 per share price target on AMC Entertainment stock. Similarly, Wedbush analyst Alicia Reese expects the theater operator to use that as a launchpad for strong results in the back half of the year. However, she still has a $3.50 per share one-year price target.

Overall, Wall Street has a consensus sell rating on the company though the price target of $5.54 per share implies 13% upside from where AMC stock is currently trading. A string of summer blockbusters, though, could enhance that trajectory.

Counting on Hollywood to Produce a Blockbuster Summer

The first movie AMC was counting on to kick off the summer season was Furiosa: A Mad Max Saga. The fifth installment of the Mad Max franchise was expected to be the next winner in the series, especially after 2015’s Fury Road. 

These movies aren’t the box office equivalent of a Marvel movie generating $1 billion at the theater, but for their relatively restrained production budgets, they have been profitable. Furiosa, unfortunately, is not in the same league. After just two weeks, it has a worldwide box office of $144 million and is fading fast. It will likely turn into a money-losing movie as its production budget is an estimated $168 million.

There are a lot of reasons why, though. Most notably is “Mad Max” doesn’t even appear in the film and it’s a movie about a character not many people care about. There just isn’t a draw for an audience even though it earned 90% ratings on Rotten Tomatoes from both critics and the audience.

The same can’t be said for Deadpool & Wolverine due out in July. Two insanely popular characters in the same film are bound to be a huge success. Similarly, Despicable Me 4 aimed at kids could be another winning entry.

It was just two movies that carried the box office in 2023, The Barbie Movie and Oppenheimer but it’s tough to run a business on just a pair of hits every year. Of course, not many thought either of those movies would move the needle all that much so there is always the potential for other new breakout hits.

What Should Investors Do?

AMC Entertainment stock doesn’t often trade on its fundamentals. Or rather, the depressed nature of the theater chain’s sales show most investors don’t have a positive outlook for the theater chain but the injection of meme stock interest shakes up the volatility.

Even when the trading frenzy doesn’t relate to AMC its stock still goes along for the ride. The recent return of meme lord Keith Gill, more popularly known as Roaring Kitty, injected some much-needed life into AMC stock. But his focus was on GameStop (NYSE:GME), not AMC.

Whatever the merits (or demerits) of investing in the video game retailer, it doesn’t automatically apply to the movie theater chain.

That suggests investors need to focus on what AMC Entertainment’s business prospects are. Right now, they don’t look good. If Hollywood continues failing at producing solid box office hits, then there is little hope of AMC Entertainment stock breaking out higher for long.

Analyst Wold’s $8 price target is the Wall Street high. It’s an outlier and investors should count on the theater operator hitting it. With shares sitting well above the lows hit before the meme stock frenzy hit, investors should use the opportunity to pocket profits.

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.