Is AMC Turning the Corner?
If you have read my articles in the past, you’ll know I have been quite critical of meme stock sensation, AMC (NYSE:AMC). Why? I am slightly bearish on the movie theater industry and what it will look like in the future. I also do not think AMC’s stock trades alongside the company’s intrinsic business value, but I’m definitely not getting into that argument here.
What I do know is that AMC is utilizing its capital in some great and not so great ways. The COVID-19 pandemic hit theaters hard and a lot of AMC’s rivals have not been able to recover. So what is CEO Adam Aron doing? He is snatching up unused theaters at a rapid rate. Earlier this week he acquired seven new locations across the East coast of America. This is on top of the seven locations he bought earlier in the year in Chicago and Los Angeles. AMC now has over 10,500 screens around the world and is wielding its global brand power to increase its market share.
This is a great strategy in my opinion: buy low, sell high. Well not exactly sell high, but utilize these new locations to your benefit. With the worst of the pandemic now behind us, the box office has been seeing some steadily improving sales numbers in recent months. Major blockbusters like the Batman, Sonic the Hedgehog 2, and Fantastic Beasts 3, are helping to boost AMC’s bottom line.
And the Not So Great
The investment in Hycroft Mining (NASDAQ:HYMC) had analysts and investors scratching their heads. Sure, Aron might be diversifying AMC’s investments and once again, buying low on a valued asset. Hycroft wasn’t doing great before AMC’s investment and the gold mining company does not really grade out as a promising investment for the future.
Hycroft mines and sells gold and silver, a straightforward mining company if there ever was one. The price of gold is currently testing all-time highs once again and is trading at around $2,000 per ounce. Even with gold near an all-time high, Hycroft hasn't been able to manufacture any momentum.
AMC’s investment will help, but Hycroft had plenty of cash on hand even before Aron took a stake. This points to an even deeper issue with Hycroft that will not be solved by an injection of money.
AMC is Doing Well With What it Has
Yes, I am still complimenting the job AMC has done. Adam Aron is no Jamie Dimon, but the CEO has turned into a folk hero for the retail traders. He has also restructured their long-term debt, saved the company from bankruptcy, and expanded its portfolio of domestic and international locations. The Hycroft investment may still work out, but at the very least the company is diversifying its capital into other sectors. Who knows what the future holds for AMC and Hycroft, but for now, I am tipping my cap to the company for using their capital in efficient and creative ways.