AMC Entertainment (NYSE:AMC) is looking like to will be able to outlast its bears. In short, people are returning to going to the movies. This has huge implications for AMC stock. As I explained last month, I believe that the company will become free cash flow (FCF) positive by next year.
This is a direct result of people returning to AMC movie theaters. And don’t forget — AMC Entertainment is the largest movie theater company in the world.
As a result, AMC stock is likely to rebound over the next year. After dipping to a trough of $29.84 on Aug. 4, the stock has floated up to $36.82 as of Oct. 12. I suspect it has much more to go.
What’s Going on With AMC?
Now that the quarter is over, it will be interesting to see the Q3 figures that AMC produces. All indications are the Q3 and likely now Q4 as well will show a huge improvement quarter-over-quarter (QoQ) in the company’s revenue and earnings performance.
For example, recently news came out that AMC had set a post-reopening record for global attendance and admission revenue. Specifically, the opening weekend for Venom: Let There Be Carnage made $90 million. This led to the second biggest ever domestic opening for an October movie in cinema history.
Additionally, the latest James Bond movie, No Time to Die, set records in the U.K. and apparently made about $56 million in the US so far. In addition, this past weekend was the fourth in the past 18 months to have passed the $100 million mark, according to an article in Variety quoting Comscore.
A lot of people know that I like to watch movies. I have written a number of articles about movies that I like to watch. One thing I’ve noticed is that people are definitely returning to theaters. Even the new Bond movie, clocking in at two hours and 43 minutes — which I thought was very good — was reasonably packed. So I can attest to the rebound that movie theaters seem to be having.
And upcoming blockbusters in Q4 should probably do well as well. The remaining 2021 film slate includes plenty of titles getting a lot of buzz, including Eternals, Dune, Ghostbusters: Afterlife, House of Gucci, West Side Story, The Matrix Resurrections and Don’t Look Up.
Where This Leaves AMC Entertainment
As a result, I expect that AMC Entertainment will post fairly strong results for both Q3 and especially Q4. Analysts expect that revenue this year will reach $2.5 billion and rise to $4.58 billion by the end of 2022.
That represents an increase of over 83% by the end of 2022. That, of course, assumes that there aren’t any further shutdowns that would put a damper on AMC’s business.
As I have pointed out before, the whole analyst community believes that the stock is overvalued. But I am not so sure. I suspect that once the company starts to produce large amounts of free cash flow (FCF) their price targets will start to rise again. This is why I am staying at my original price target of $57.84 per share as I described it last month.
What to Do With AMC Stock
At this point, investors are likely waiting to see what is going to happen with the Q3 and Q4 revenue and earnings numbers. However, I contend that you can track this stock’s prospects with your own eyes. Go to an AMC theater and see for yourself whether people are going back to the movies.
My conclusion is that they are. As a result, investors might want to take time to consider when to invest in AMC stock. One way to do this is to take an initial stake and then buy more if the stock falls and modest amounts if it rises from here.
On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.