Stocks to sell

Why You Should Avoid AMC Stock Despite a Strong First Quarter

AMC Entertainment’s (NYSE:AMC) first-quarter results showed rebounding sales with a healthy loss reduction as it looks to return to winning ways in the post-pandemic world.

During the first quarter, company sales shot up to $785.7 million, over five times the figure from the same period last year. Moreover, it came in ahead of $743.4 million analyst consensus estimates. Additionally, net losses shrunk from $567.2 million to $337.4 million.

AMC has benefitted immensely from an incredible film slate, starting with the latest Spider-Man movie in December. The movie ended up being the sixth highest-grossing film in history. The Batman followed it up. The latest smash-hit from Marvel, Doctor Strange in the Multiverse of Madness, made $185 million in its opening. AMC performed significantly better with the film with a 26% domestic market share, a 4% bump from its historical average. Moreover, with a strong upcoming lineup of films, AMC expects a robust showing this year.

Is AMC stock a buy then? Not quite. For starters, domestic box office collections are roughly 75% lower than pre-pandemic levels for the second quarter running from April to June. Hence, the talk about the massive recovery seems far-fetched.

Moreover, the theatre giant still has a sizeable amount of debt to pay off and will need more funding to sustain operations. Its recent unrelated investment in gold miner Hycroft Mining (NASDAQ:HYMC) suggests it must keep itself relevant with the retail trading crowd. AMC will perhaps have to issue new equity and its meme stock status will help with that. Overall, despite a relatively strong performance, it’s best to avoid AMC stock.

On the date of publication, Muslim Farooque did not have (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

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.

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