‘F9’ offers a glimmer of hope for AMC and other movie chains, but only a glimmer

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In typical Hollywood fashion, a hero rushed to save the country’s beleaguered movie theaters from certain doom. Universal’s latest action movie, F9: The quick saga (the ninth installment of Fast and furious series), has just given movie channels a well-deserved boost. As AMC Entertainment Holdings (NYSE: AMC) CEO Adam Aron said, “The big screen is back! […] At AMC, we salute our friends and partners at Universal Pictures after their record breaking performance following the reopening of F9: The quick saga. “Presumably, rival theater chains Cinemark Holdings (NYSE: CNK) and Cinémonde Group (OTC: CNNW.F) saw a similar business bump.

Is this hyperbole? Aron has something of a penchant for heated discussions. His optimism also ignores the possibility that consumers will be prepared to do anything that looks like the pre-pandemic standard; F9 maybe just the first opportunity to do it. There is no guarantee that this high interest in the theatrical experience will last. Overall, however, this is something the movie side of the business can build on.

Of course, that doesn’t necessarily mean that movie theater stocks are all buys.

Better, but still not great

As the old saying goes, a picture is worth a thousand words.

Looked. Last weekend’s national box office of nearly $ 98 million is the best regular weekend (three days) the film industry has seen since the pandemic took hold in March 2020, according to the figures by Box Office Mojo.

Data source: Box Office Mojo. Chart by author.

Technically speaking, Memorial Day weekend was slightly better at $ 98.3 million, led by A Quiet place, part II. But this weekend’s ticket sales tally includes a fourth day, Bank Holiday Monday.

There is no denying that the demand for motion pictures is not what it was before COVID-19 took hold. Before the pandemic, average ticket sales for weekend movies were reliably between $ 140 million and $ 180 million. Last weekend was almost half the typical number, and could have been significantly lower without F9brought in $ 70 million in transportation.

There is an important footnote to add to the question. Studios like AT&Tby Warner Bros. and Comcast‘s (NASDAQ: CMCSA) Universal is reluctant to release new films until the contagion of the coronavirus is clearly in the rearview mirror. Some also distribute new films through streaming platforms. The point is, cinemas can’t make a full recovery unless studios are prepared to take the risk of releasing new films for the big screen. Chicken egg.

Keep it in perspective

It’s a win for Cinemark, Cineworld and AMC, of ​​course. But a good weekend is not enough to officially declare the cinemas out of harm’s way. As has been noted, consumers may have simply been prepared for all kinds of cool entertainment … especially indoor entertainment, as a heat wave tears through the country.

Perhaps the biggest takeaway is that – at least this time around – it took a major, booming title like any other. Fast and furious entrance to attract a crowd to theaters.

Person sitting in a movie theater.

Image source: Getty Images.

The idea started to circulate last year. In the new normal of a post-pandemic world, studios could limit their theatrical releases to films that need to be seen in theaters to be fully appreciated. The rest can go straight to streaming, and some certainly will. Indeed, some of them already is bypassing theaters and used to populate the selection of streaming platforms. Given this lack of blockbuster content, domestic box office levels are unlikely to ever hit their inflation-adjusted highs. The movie theater industry has been on the decline for years now.

Even as theaters nationwide fully recover to pre-pandemic demand levels, AMC shares remain shockingly overvalued, trading at 267 times the company’s best ever net profit in 2017 – $ 112 million. . Operating profits and operating cash flow were also leveling off before the pandemic set in, as debt related to acquisition-driven growth did not amortize.

At the end of the line ? The glimmer of hope aroused by F9The success of s suggests that the cinema can survive. Given AMC’s already rich premium over so many lingering unknowns, it’s still hard to see stocks stay at their high prices.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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