How Did AMC 7x Revenue?

Movie theaters were already struggling before the world got turned upside down. As more consumers chose to spend money on streaming video platforms like Netflix (more than 221 million, worldwide), Hulu (about 100 million viewers), HBO Max (nearly 75 million subscribers), and Disney+ (about 130 million), fewer went to movie theaters.

It was much more convenient and affordable to stay at home, where they always had the best seats in the house and cheap snacks.

When the pandemic forced movie theaters to close temporarily in March 2020, their futures became more uncertain than ever. Even when they reopened, fewer people wanted to sit inside with strangers. It was just too great of a health risk for the average consumer to accept.

And it certainly didn’t help movie theaters that many online streaming services decided to add new blockbusters to their libraries. HBO Max chose to release Dune in theaters and stream it online.

Their approach has been copied by other production companies with ties to streaming platforms. At this point, it’s unclear whether the trend will continue after the pandemic ends.

What’s certain is that most people prefer watching movies at home than in theaters. One survey shows that 71% of US adults prefer watching videos at home. Only 23% say that they prefer going to movie theaters. 

Despite the Challenges, AMC Is Doing Well

Within this context, it might sound impossible for the AMC chain of movie theaters to earn profits. That’s a reasonable assumption, but AMC has proven that it can perform despite the challenges. 

During the first quarter of 2020, AMC brought in $163 million. During 2021’s first quarter, the company announced that it earned $1.17 billion in revenue. That means it managed to increase its revenues by over 7x compared to the previous year.

To some extent, this isn’t surprising. There was pent-up demand that super-charged the theater’s financial performance. People felt safer in public than they did a year before, so they were eager to spend money to watch blockbusters like SPIDERMAN: NO WAY HOME on the big screen.

Pent-up demand and a well-timed blockbuster aren’t the only reasons that AMC managed to nearly 10X its revenue. The company realized that it had an opportunity to make up some of its losses from the previous years. It recognized that demand existed, and it adjusted ticket prices accordingly. Of course, charging too much for tickets would convince consumers to stay home and enjoy the ample entertainment options they already have.

AMC walked the line perfectly by increasing the average US ticket price from $9.96 in 2020 to $11.50 the next year. This is a small amount for individual buyers. An extra $1.54 doesn’t mean much to a consumer who can’t wait to get out of the house and enjoy a taste of normal life in public. Internationally, AMC adjusted average ticket prices from $9.87 to $10.47.

Concessions Helped Drive Revenues

Not surprisingly, movie theaters make a lot of their money from concessions. Again, AMC recognized an opportunity and capitalized on it.

Food and beverage revenues per visitor increased to $7.21, an 11% jump from 2020. Internationally, food and beverage revenue increased 13% to $4.64.

There is a strong possibility that consumers will adjust to these higher prices, creating a long-term opportunity for AMC to continue earning more money from ticket sales and concessions. 

Movie Studios Haven’t Given Up on Theaters

There was some concern during the height of the pandemic that movie studios would turn away from theaters. After all, consumers had expressed serious interest in watching movies from home.

The movie studios don’t necessarily care how they make money from their productions. It doesn’t matter where the money comes from. If at-home streaming generates stronger revenues, studios will choose that option instead of remaining loyal to theaters.

It’s probably important to note that many directors disagreed with decisions to stream their movies instead of releasing them in movie theaters. Director Christopher Nolan publicly denounced HBO for streaming his movie Tenet, a visually stunning, mind-bending action feature that he believes should have been seen in theaters.

Many directors remain adamant that movies made for theater screens should appear on theater screens before moving to the home market.

Luckily, movie theaters still have plenty of allure for movie-lovers. They showed up for SPIDERMAN: NO WAY HOME and they turned up to watch Dune even when HBO decided to release it online and in theaters simultaneously. More recently, The Batman earned $134 million during its first weekend of box-office sales. 

Movie studios seem to believe that they can keep profiting from strategic releases that include movie theaters and streaming platforms. Conceivably, studios will make future decisions based on expected performance. Not all movies will make it to the studios. Those that do, however, will be carefully chosen to attract large crowds willing to pay for the theater experience.

AMC’s Low Stock Price Could Represent an Opportunity for Investors

Not surprisingly, AMC’s stock plummeted during the first phase of the pandemic. With low attendance and an uncertain future, investors chose to sell their shares. During April 2020, shares sold for as little as $2.00. A year before, they were selling for about $15. 

During late spring and summer of 2021, the situation looked comparatively safe. Infections, hospitalizations, and deaths were down. People started to feel safe again. Vaccinated and masked, many of them decided that they wanted to start watching movies in theaters again.

The optimism led to shares selling for more than $60. On May 3, 2021, investors could purchase AMC shares for about $10. A month later, their shares were worth about $60.

AMC stock didn’t retain its high value for long, but it also hasn’t fallen to its early-pandemic price. During spring 2022, buyers can expect to get shares for $15 to $20.

These prices are only a few dollars below AMC’s average stock value. If the company can keep showing that it has a plan to move forward, it will likely return to its earlier value. For anyone looking to make a profit, it looks like now is a good time to buy AMC shares.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.