Don’t Be Tempted by AMC Entertainment’s Rally

Shares of AMC Entertainment (NYSE: AMC) rallied nearly 5% the day after its delayed first-quarter earnings report came out Tuesday, June 9. AMC Entertainment is the largest movie theater company in the world, and needless to say, it was heavily affected by COVID-19, as basically all of its theaters were closed down due to health concerns from mid-March on.

That led to some predictably ugly first-quarter results, with revenue down 21.6%, and adjusted EBITDA down a whopping 97.1% to nearly break-even, despite theaters only being shut down for the final two weeks of the quarter. Still, shares actually rallied hard the next day, as management announced that basically all of its theaters were set to reopen in July. AMC also revealed some impressive cost-cutting measures, and has recently raised money to get the company at least through Thanksgiving with no incoming revenue.

Yet for each positive given by management on the conference call, there was usually another even bigger reason for caution behind it. Here are three reasons to steer clear of this high-risk stock right now.

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Source Fool.com