AMC Entertainment (NYSE:AMC) has been the subject of rampant speculation between short-sellers on Wall Street and retail traders on the Reddit forum WallStreetBets. One side is betting that AMC stock will fall while the other side is taking a stand and betting the stock will rise. Wall Street short-sellers have deeper pockets, but the retail traders have more people. As of this writing, WallStreetBets has 10.2 million members (although it's not clear how many of them are holding AMC stock).
AMC's stock price has fluctuated wildly in recent weeks and is up an incredible 2,160% year to date. In the tug of war between retail traders and Wall Street short-sellers, retail traders are winning. And an additional catalyst is coming to their aid in 2021 that could boost sentiment for the purchase of AMC stock.
AMC stock is up over 2,100% in 2021. Image source: Getty Images.
Studios are releasing films on the big screen and streaming platforms
At the onset of the pandemic, AMC had to close nearly all of its 1,000 movie theaters to audiences worldwide. That was devastating for the company, as it had virtually no other revenue stream.
Movie studios realized they would be unable to show movies on the big screen for some time, and several studios decided to release some potential blockbusters to streaming platforms instead. Indeed, AT&T's (NYSE:T) WarnerMedia announced that in 2021 it would simultaneously release all its films on the big screen and on HBO Max. And unlike what other Media companies were doing with offering premium access to movies on their streaming services, HBO Max would show these new releases for a limited time at no additional cost to subscribers.
That announcement hurt AMC's stock price. If a movie is available on a streaming platform free for subscribers, it could discourage those folks from viewing the films in an AMC theater. Walt Disney (NYSE:DIS) has used a similar, but not identical, strategy. It released some films, like Raya the Last Dragon and Cruella, to theaters and directly to its streaming platform Disney+ for a premium fee of $29.99 while offering other films, like Soul and Onward, free to subscribers.
While it's still unclear what overall effect the change is having on moviegoing, certainly some folks who would have otherwise watched a movie on the big screen chose to watch it on a streaming service instead.
Flipping the script
If streaming providers find that the experiment is not going well and announce an end to the strategy, it could give a boost to AMC stock. What's more, it could give AMC and other theater chains more negotiating power with studios that will have lost some leverage after a lack of success in the straight-to-streaming strategy. Movie studios and theater chains typically negotiate a revenue split on movie releases, usually ending up in a near 50/50 split. However, studios have at times secured as much as a 65/35 split for a tentpole release.
Investor takeaway
Considering that it hasn't taken much to move AMC stock higher year to date, an announcement like this could give real cause for AMC stock to soar. Admittedly, that scenario may be unlikely, but its chances are certainly not zero.
Still, this is not enough cause to buy AMC stock, and investors should be aware that AMC stock is a volatile investment that has the potential to rise and fall dramatically.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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June 07, 2021 at 08:40PM
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1 Catalyst That Could Send AMC Stock Soaring - Motley Fool
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