Theater Chain AMC’s Stock Jumped. The WarnerMedia Deal Wasn’t the Main Reason.

Shares of AMC Entertainment Holdings jumped on Monday. While the news of the day in the film industry was Discovery ‘s deal to merge with AT&T’ s WarnerMedia, that may not be what caused the pop.

The WarnerMedia deal will have big implications for the film business, but Wedbush analyst Alicia Reese told Barron’s she doesn’t think it will upend the studio’s release strategy. That’s not a bad thing, as the company has said it only plans to debut films on HBO Max alongside theaters for 2021. Reese thinks it will play out that way, even with the added wrinkle of the Discovery merger.

“The bottom line is that studios need theatrical revenue – it is the largest revenue driver within a film’s lifespan and recoups a large portion if not all of the film’s budget, and it assuages directors and actors who are not keen to skip the theatrical window,” Reese said in an email.

She notes that less popular films could find their way on HBO Max faster than the blockbuster hits, which could drive subscribers for the burgeoning service.

“We think Netflix helps to make this point here, as it has been testing a short, exclusive theatrical window with Cinemark (we expect a negotiation with AMC next),” Reese wrote.

AMC stock (ticker: AMC) was up 7.6% to $13.95 on Monday. But it’s been on a 7-trading-day run, which has included enthusiasm from retail investors on Reddit’s WallStreetBets forum. Such users have been betting against short sellers on a return to glory for the movie theater chain. It’s working so far; the company in the past month has managed to sell stock at levels well above its one-year lows, significantly adding to the chain’s war chest just as pandemic restrictions fade away.

Another sign that AMC stock may not be moving on the WarnerMedia merger? Theater chain Cinemark Holdings (CNK) closed down 0.7%. On the flip side, fellow meme stock GameStop (GME) was up 13%. Since both names are still popular with short sellers, there’s bound to be some volatility.

Source:-https://www.barrons.com/articles/theater-chain-amcs-stock-jumped-the-warnermedia-deal-wasnt-the-main-reason-51621291731

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