3 Reasons to Avoid AMC Stock and 1 Rival to Buy Instead

Movie theater operator AMC Entertainment Holdings (NYSE: AMC) has been on the outs for a while. The stock soared 1,180% in 2021, but that lofty peak was followed by price drops of 76%, 82%, and 35% in the next three years.

AMC's stock price is down another 20% year to date. Some might call this the bottom of the barrel, arguing that the stock is poised for a huge recovery. Let me show you three reasons why I disagree, followed by a sector rival that really does look like a good investment today.

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AMC's business never recovered from COVID-19

The movie theater industry was already struggling when the coronavirus pandemic arrived. At the end of 2019, AMC's stock had fallen 53% over the previous two years amid flattish sales growth and unpredictable profits. The lockdown era only accelerated an existing downturn.

AMC's business has indeed improved from the absolute trough of late 2020 and early 2021, but it remains a shadow of its former self. The company has consistently burned cash in each of the last five years, trailing sales are down 17% from fiscal year 2019, and the theater network is shrinking. AMC has about 900 theaters and 10,000 screens today, approximately 10% below the screen count in 2019.

The lofty share price heights of 2021 aren't coming back

AMC was a meme stock in 2021. The record stock price wasn't based on business success, but on successful promotion in social media channels. The online chatter about "AMC stock" has died down, and so has the trading volume. On the other hand, the stock remains heavily shorted, even though the share price is down more than 99% from the fading all-time high.

You might want to bet on a modest recovery in AMC's business, but the potential returns will never be a hundredfold. The stock was priced at $339 per share, with a $38.6 billion market cap in a very different era.

Image source: Getty Images.

AMC kept the lights on by exploiting the high stock price

AMC started issuing more stock as soon as the share price took off. After a brief pause, the share count started skyrocketing again in 2023. There are now 433 million AMC shares on the open market, up from 23.5 million at the end of 2019.

These stock sales put extra cash in AMC's coffers while diluting the value of existing shares. I mean, I get it. AMC needed extra cash to keep the company alive, so why not ask shareholders for some help?

But this habit doesn't make me want to own AMC stock, especially since the stock sales are still ongoing. This isn't ancient history, but an active cash management policy.

Here's a better investment idea in the movie industry

A sea change is underway in Hollywood (and related areas). As always, you'll find Netflix (NASDAQ: NFLX) leading the charge into new territory.

Many investors were giving up on Netflix's growth story in 2022, when the company introduced ad-supported subscriptions and switched tactics from maximal subscriber gains to profitable revenue growth. If you bought more Netflix shares three years ago, near the bottom of that temporary dip, you'd have a 54% return on your hands today.

The fall of 2018 was another weak point. Netflix shares fell as much as 20% from September to December that year. Investors at the time worried about generous content production budgets and deeply negative cash flows. But then-CEO Reed Hastings called those expenses "investments" in Netflix's money-making future, and he turned out to be right. If you had picked up Netflix stock six and a half years ago, near the bottom of that downswing, you'd have seen a 126% gain by now.

I haven't even talked about the Qwikster rout of 2011, the sudden increase in international expenses in 2015, or several other short-term issues that Netflix easily overcame. Critics are often quick to dismiss Netflix as a former growth stock whose golden age already happened. And the company is equally quick to prove them wrong, time and time again.

Yes, Netflix shares are trading near all-time highs in the summer of 2025. Sure, the stock still looks expensive at 58 times trailing earnings and 13 times sales. But I'm more than happy to hold on to my Netflix shares at this point and am tempted to buy more. Netflix is the future of filmed entertainment. Like Blockbuster, AMC represents the same industry's fading history.

Should you invest $1,000 in AMC Entertainment right now?

Before you buy stock in AMC Entertainment, consider this:

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Anders Bylund has positions in Netflix. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.