AMC Stock Is Up 28%. But Is It a Buy?

There's still time for a Hollywood ending for AMC Entertainment (NYSE: AMC). The multiplex operator may be trading more than 99% below the split-adjusted high it reached four summers ago, but momentum is on its side these days. AMC stock has risen 28% since bottoming out two months ago.

The bullish turn might not seem apparent at first. Revenue declined last year, and it has now clocked in negative in four of the last five quarters. Trailing revenue is 17% below its 2019 peak. AMC hasn't delivered an annual profit since 2018. One can argue that AMC is simply rallying alongside the overall market, but there are some potential catalysts fueling the lift. Eyes on the screen. The movie could be just getting started.

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Coming attractions

This year got off to a slow start at the local multiplex, and it translated into a rough first quarter for AMC. Year-over-year revenue declined 9%. Its net loss and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) deficit widened. Thankfully traffic picked up on the heels of some tentpole releases during the current quarter.

Domestic ticket sales are currently 25% higher than they were at this point last year. This year's three highest-grossing theatrical releases -- A Minecraft Movie, Lilo & Stitch, and Sinners -- all came out in the current quarter. Analysts see AMC bouncing back with a 26% jump in revenue for the second quarter, its strongest showing in nearly two years.

Wall Street pros see a return to top-line growth for all of 2025, and the current estimate calling for a 7% increase could prove conservative. As strong as the studio slate has been since April, the rest of the year could be a murderers' row of releases. Avatar: Fire and Ash, Jurassic World: Rebirth, Wicked: For Good, and Zootopia 2 should all pull huge audiences. Fresh installments in in the Superman and Fantastic Four franchises should bring out fans of superhero action movies.

The crowds are coming. Revenue growth will follow. Investors are coming. The upticks should follow if AMC can turn its bottom line around.

Image source: Getty Images.

Sticking to the script

Like any good superhero origin story, AMC has had to claw back from a dark place. The exhibitor has seen its share count explode on this end of the pandemic, well beyond the 1-for-10 reverse stock split two summers ago. The bloated share count is a good reason why AMC has been one of the market's worst performers over the last four years.

It's time to flip the script. This isn't a bad time for all movie theater stocks. Smaller rival Cinemark has been profitable since 2023, and things are going so well that it resumed paying a quarterly dividend this year. There's a shocking contrast, and an even more shocking similarity here.

Cinemark has moved higher in the same four-year stretch that AMC has surrendered 99% of its value. Wow? And there's this: AMC and Cinemark are somehow trading at the same enterprise-value-to-trailing-revenue multiple of 2.1.

AMC should have returned to profitability by now. Long-term debt is actually contracting for the fifth year in a row, and it's rolling out premium in-theater offerings to boost revenue per guest. Per-share profitability will be a problem with the outsize share count, but sentiment will improve once AMC is out of the red and fading to black. Analysts may not see that happening for a couple of years, but movie studios are giving multiplex operators the lifeline they need with the pipeline they feed.

The turnaround has to start somewhere. Thankfully for AMC investors, it's starting to take shape this quarter. It can't fumble the popcorn bucket again.

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

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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.