Facing Reality: AMC’s actions veer towards brutality and fatality

Meme stock traders could root AMC Entertainment (NYSE:AMC) stock and its famous CEO, Adam Aron. However, it is important for sensible investors to look closely at the actual data as there is no reason to expect a return to 2021, 2022 or even 2023 price levels.

Not long ago, AMC Entertainment refinanced $2.45 billion worth of debt. Some viewers celebrated this, but that doesn’t negate the fact that AMC Entertainment has to pay $2.45 billion plus interest.

In fact, it’s probably worse than that, since Bloomberg reported that AMC Entertainment “struggled against $4.5 billion in long-term borrowing as theater attendance remains below pre-pandemic levels.”

So AMC Entertainment’s recently released quarterly results were of crucial importance – but unfortunately don’t suggest a happy ending is in store.

First, some (sort of) good news

Given AMC Entertainment’s heavy debt load, the company really needed to hit a home run with its second quarter 2024 financial report. However, there was no home run, although there may have been a few or doubles.

Here’s the breakdown for Q2 2024. AMC Entertainment’s admissions revenue totaled $564.4 million, coming in below the Wall Street consensus estimate of $586.6 million. So far, not so good.

Meanwhile, AMC Entertainment’s total quarterly revenue fell 23% year-over-year to $1.03 billion, which is also not good news. But hey, at least this result was in line with the Wall Street consensus estimate.

AMC Entertainment reported an adjusted earnings loss of 43 cents per share. This result was also in line with analysts’ consensus forecast.

I suppose, with some mental gymnastics, one could interpret AMC Entertainment’s bottom-line results as positive news.

AMC Entertainment: Don’t celebrate the results

Mental gymnastics is not healthy like real gymnastics. Indeed, they can be very damaging to your financial health.

Let’s look at AMC Entertainment’s quarterly results from another angle. The company reported a net loss of $32.8 million for Q2 2024. In contrast, the company disclosed a loss of $8.6 million advantage (not a loss) in the prior year quarter.

Thus, year-over-year, AMC Entertainment’s admissions revenue fell short of Wall Street’s expectations, the company’s sales fell 23%, and AMC posted a net loss. The result is that there is no real cause for celebration here.

However, Aron is the ultimate hype man and will celebrate regardless of AMC Entertainment’s actual results. For example, like at Barron’s reported, Aron “touted the company’s growing cash reserves,” which rose from $624 million in the first quarter of 2024 to $770 million in Q2.

That’s all well and good, but nowhere near AMC’s aforementioned $4.5 billion in long-term loans.

AMC Entertainment’s “growing cash reserves” likely won’t grow fast enough to cover the company’s debt, even if there are occasional blockbusters that bring in substantial revenue.

AMC Stock: Choose reality over mental gymnastics

Cherry picking a few somewhat positive data points is a bad habit. I urge you to avoid the mental gymnastics and face the harsh reality of AMC Entertainment’s financial woes.

Maybe there will be another revival of meme stocks, but it’s not something you can count on. A far more likely outcome is that AMC Entertainment stock will lose substantial value because of the company’s fundamentals.

With that in mind, investors should brace themselves for a brutal future with AMC stock. It’s best to sell your shares as soon as possible to avoid potential losses and heartbreak.

At the time of publication, David Moadel has not had (either directly or indirectly) any position 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.

At the time of publication, the responsible editor did not (either directly or indirectly) also hold positions in the securities mentioned in this article.