Movie Theater Stocks Are So Hot That Even AMC Is Crushing the Market

If you're one of those perpetual bashers of multiplex operators, don't sleep on a plot twist of M. Night Shyamalan proportions. Exhibitors worldwide are doing something they haven't done since 2019. With The Odyssey cruising to $666 million in global ticket sales through its first 11 days of screenings, it's a lock to become the fourth U.S. theatrical release to clear $1 billion in box office receipts. It will join Toy Story 5, Michael, and The Super Mario Galaxy Movie, making this the first year since 2019 that U.S. studios have released more than three movies that grossed at least $1 billion worldwide.

Zoom out a bit more. Spider-Man: Brand New Day opens this weekend. The early critics' reviews have been positive. More importantly, the last film in this franchise, 2021's Spider-Man: No Way Home, was the only film to clear $1 billion globally that year. Even if it generates just a little more than half of the $1.9 billion of that film, it will become the fifth film to reach that 10-figure milestone.

Another film that's highly likely to get there is December's Avengers: Doomsday. The last installment in this franchise grossed $2.8 billion at the global box office in 2019 and is now the second highest-grossing movie of all time. We're looking at six U.S. movies clearing at least $1 billion in worldwide ticket sales, something that has only happened one other year in Hollywood's history.

Is it finally time to swallow your pride and buy some shares of AMC Entertainment (NYSE: AMC)? Stop laughing, and start paying attention.

Image source: Getty Images.

Ripping stubs and taking names

AMC stock has been one of the worst performers over the past five years, down a brutal 99%. We'll dive into that a painful plummet, but pull up its 2026 chart. Shares of the country's leading multiplex operator are up 71% this year. The market is up less than 9%.

There are some good reasons for the stock's ascent this year. Unlike its past meme-stock rallies, fueled by the vapor of online hype that ultimately proved unfulfilled, AMC is in a better place right now. The industry is back, waist-high into the strongest year of ticket sales in seven years.

Folks are back at the corner multiplex, but that's just part of the story. Exhibitors are getting better at monetizing the increase in patrons. For AMC, this has come in the form of expanding its snack and beverage offerings. It introduced its AMC Stubs A-List subscription service in 2018 and enhanced it a year later by rolling out reserved seating at most of its locations. The pandemic snuffed out its early momentum, but it's in a groove now with timely promotions, blockbuster-specific merch, and a zest for making a night at the movies matter again.

Learning from past mistakes

AMC hasn't done right by its shareholders. It took advantage of its meme stock status to flood the market with new shares. As smaller competitors focused on becoming profitable and viable, AMC got distracted. The growing forum fandom became a dinner bell for side bets on NFTs, gold mining, and dilutive preferred shares. The lack of cost controls didn't help.

I'm not asking you to forgive AMC for the sins that turned a $2 investment five years ago into your two cents' worth. Its CEO somehow survived the slide despite increasing its share count 42-fold since 2019, and I'm not suggesting you give him credit for this year's rebound. However, why would you not take a closer look at the top dog in an industry that's sneaking up on the market with the mother of all recoveries?

This rising tide that has been lifting all ships is starting to lift the biggest boat. AMC posted an adjusted profit in the second quarter, only the third time since the pandemic. It may not be sustainable in the near term, but analysts who don't see a full year of profitability until 2028, something that hasn't happened since 2018, may be underestimating the turnaround.

The world never gave up on going to the movies, and the U.S. is coming around again. How else do you explain the popularity of horror films this year on shoestring budgets, the fluid cadence of upcoming blockbusters, and your own admission that you want to catch The Odyssey on the biggest movie theater screen nearby before it's too late?

Give AMC a second chance. This time, don't dwell on where it was. Focus on where the leading theater chain is now and where it's going.

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.