AMC Entertainment Earnings: AMC stock craters as bulls take profits following consensus beat

• AMC reported an earnings beat late Tuesday.
• Both adjusted EPS and revenue fell YoY.
• AMC stock dropped 8% in Wednesday's premarket.
• CEO Adam Aron said that box office numbers are up 44% in the first half of Q1.

AMC Entertainment (AMC) stock is down 8.1% at $6.56 in Wednesday's premarket trade after early excitement over the cinema chain's fourth quarter beat of Wall Street consensus projections faded into the realization that the final quarter of 2022 saw a worse performance than the same quarter one year before. Though AMC CEO Adam Aron said his company was "on a multi-year glide path to recovery," the market on Wednesday has focused on AMC's per share loss falling 27% YoY and its revenue in the quarter receding 15% YoY.

AMC stock news: Box office receipts up 44% in early 2023

AMC reported adjusted EPS of $-0.14 on revenue of $991 million late Tuesday. This compares to year ago results of $-0.11 per share on revenue of $1.17 billion. Initially, however, AMC stock rose more than 3% afterhours on Tuesday since the results beat Wall Street's more dour expectations for $-0.22 per share on revenue of $978 million. The AMC stock price then succumbed to selling pressure as bulls decided no short squeeze was imminent. Besides AMC stock had already rallied 69% over the previous two weeks, so it is unsurprising that bulls decided to cash in their receipts. 

Always the optimist, Adam Aron produced a robust defense of AMC's trajectory on the earnings call. "In my opinion, there are five reasons why AMC shareholders should be especially excited and smiling today: first, the increasing size of our industry as it recovers; second, AMC's performance in Q4; third, the fact that we are outperforming our competitors; fourth, our agility in raising cash and reducing debt; and fifth, this morning's Walmart-AMC Perfectly Popcorn announcement," Aron said.

If you did not understand that last part, AMC is now retailing its own brand of popcorn in Walmart stores nationwide.

AMC welcomed 49.6 million customers during the fourth quarter, but this was a fall of some 3.6 million less than the previous quarter. The US market saw most of the dropoff in attendance, while the international segment made up some of the difference. Revenue in the quarter on a per patron basis rose to $19.98, which made up for some of the shortfall in attendance. In January AMC sold off its 13 movie theatres housing 85 screens in Saudi Arabia, but that will not be felt until AMC reports it first quarter results.

Worldwide, cinema attendance is still down compared to the pre-covid era. 2022 film attendance was still at about 60% of 2019 levels globally. The hope is that this begins to change in 2023 as the fear of covid recedes and that the attendance shortfall does not become a permanent feature, although the covid era does seem to have made streaming entertainment much more mainstream. The most positive sign from the earnings call came when Adam Aron said AMC saw a 44% YoY rise in box office attendance at the start of the present quarter – Q1. Aron added that AMC predicts that 30 movie titles will gross over $100 million in 2023 compared with just 18 in 2022. 

The large rally over the final half of February was aided on Monday when a judge from the Delaware Chancery Court temporarily halted AMC's attempt to convert APE preffered equity units into AMC common stock. AMC shares rallied 23% on that news alone. The injunction hearing brought by the Allegheny County Employees' Retirement System, the pension fund of public workers in the county that includes Pittsburgh, PA, will be heard on April 27.

AMC stock forecast

On the basis of the daily chart, this was an opportune time to sell AMC stock. Monday's rally had pushed AMC into the supply region that ranges from $8 to $9.15. That range has seen a number of sell-offs in the past two years. Now that AMC stock is flagging, expect shareholders to resort to support at $5. The $5 level worked as support in both early November and in late January.

That is quite a distance below Wednesday's premarket price, but AMC is a volatile stock and there is not much strong support until that price level is reached. Of course, the 9-day and 21-day moving averages sandwich the $6 level, but neither moving average has been dealt much respect in the past six months. AMC stock trades on news and its meme stock reputation, not so much on technical levels.

AMC daily chart