3 Reasons You Shouldn’t Get Excited By AMC Stock’s 22% Surge

AMC Entertainment (AMC)  had its best day in five years on Monday, jumping more than 22% and ranking as the 27th-largest bullish price surprise yesterday with a standard deviation of 3.10. 

The company announced that 25.5 million people attended its theaters last month, the highest May figure since 2019, before the pandemic. Approximately 16% of the monthly total came over the four-day Memorial Day long holiday weekend. The average daily attendance for the other 27 days was impressive at 788,888.

Cue the comeback? Not so fast. 

Even with the 22% surge, AMC remains deep in penny-stock territory, closing yesterday’s action at $2.12. Its shares haven’t traded above $5 since January 2024. 

If you’re an extreme risk-taker, AMC options might be your cup of tea, but for the rest of the retail crowd who can only stand so much volatility -- it's had 35 moves of 5% or more in the past 12 months -- there is no need to get excited about yesterday’s big move. 

I’ve got three reasons why AMC should be a non-starter for long-term investors.  

The Glass Is Half Full. That’s the Problem.

I’ll be honest. I’ve never been a fan of the company or AMC’s CEO, Adam Aron. While his resume is deep -- at one time or another, he’s been in charge of the Starwood Hotels, Philadelphia 76ers, Vail Resorts (MTN), and Norwegian Cruise Line Holdings (NCLH) -- his move with the board’s blessing to invest $28 million in Hycroft Mining (HYMC) in 2022 was completely offside from a fiduciary standpoint, in my opinion, regardless of the outcome.  

The investment, in hindsight, has worked out. To date, it has generated $26 million in profits, with the remaining 129,478 Hycroft shares valued at $4.25 million as of yesterday’s close.

The thing is, Aron was hired in 2016 to grow the entertainment business’s core operations, not to invest in junior mining companies. When Aron took the job at the beginning of 2016, AMC stock was trading around $24 (after accounting for a 1-for-10 reverse split in August 2023), about 12 times its current level. 

The one thing AMC has done well under Aron’s 10-year run is to accentuate the positive, no matter how much spin is necessary. 

Are May’s numbers good news? You bet, but only if you use 2019 as the benchmark. 

Good But Not Great

Early on, after COVID subsided in the summer of 2021, everybody and their dog compared their numbers to 2019 before the pandemic. It made sense at the time, as many consumer-facing businesses had set all-time sales and earnings records that year.  

In 2019, its revenues rose by 1.6% (constant currency) to $5.55 billion, with adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $781.4 million, down 6.5% from 2018. 

Those are good but not great numbers. However, they are certainly much higher than the $5.03 billion in trailing 12-month revenue ended March 31 and the $439.6 million in EBITDA, according to S&P Global Market Intelligence. 

On an apples-to-apples basis, the 2019 EBITDA margin was 14.1%; as of March 31, it was 8.7%, representing a 540-basis-point improvement. 

Since going public in 2013, the highest annual EBITDA margin was 16.9% in 2016 -- EBITDA of $546.7 million on $3.24 billion in revenue -- Aron’s first year as CEO.

In 2016, AMC’s attendance was 215.15 million. That compares to 356.44 million in 2019. There’s no question that attendance peaked for AMC in 2019. However, the peak year for ticket sales in North America was 2002, with 1.57 billion tickets sold, 340 million more than in 2019. 

The big reason for higher revenues for AMC and the entire industry is higher ticket and concession prices. 

In Q1 2026, AMC’s average ticket price was $12.15, 29% higher than $9.42 in Q1 2016. Food and beverage revenue per patron in Q1 2026 was $7.29, 53% higher than $4.76 in Q1 2016. 

If not for inflation, AMC’s Q1 2026 results wouldn’t be nearly as good.

Debt’s Not Going Away 

The biggest issue with AMC stock, other than the fact that the heyday of movie-going has long since ended, is that it has way too much debt relative to the level of growth it has delivered. 

According to S&P Global Market Intelligence, its Altman Z-Score is -1.04 -- the Altman Z-Score indicates the likelihood of a company entering bankruptcy proceedings in the next 24 months -- anything below 1.81 is considered in the distressed zone. The only time it’s been lower since its IPO was in 2020 at -1.13.  

While its total debt at the end of March was $7.93 billion, considerably lower than the $11.35 billion at the end of 2020, it’s hard to imagine this number going much lower given its level of profitability. 

In the 12 months ended March 31, it had interest payments of $476.7 million, 3.8 times its $126.6 million in operating income. By GAAP standards, it doesn’t have free cash flow to quickly pay down its debt. 

With inflation sticking around, interest rates might have to go up, not down, adding a greater burden on AMC to deliver more attendance results as we saw in May. 

I don’t see this happening if gas prices remain high. Movie-going is about the easiest cost-cut you can make in difficult economic times. 

As I said earlier, unless you can find an options play to lower your exposure, AMC’s not something to bet on for the long haul. 

It’s a dead stock walking.