That feeling you get when you realize the US / China trade deal resulted in China buying more Soy Beans and tariffs on tech products are not going away.
Day of reckoning is tomorrow you chimps! #PartyOver
Peter, your post actually validates the bear case.
The fact that someone else had to tell you what is happening in the theaters says it all. THere was a time in my life, mid teens-early 30’s, where I could say I at least saw 3 movies at the theater per year.
Now in my 40s, with 2 kids both over 6 years old, I have not been to a theater in over 3 years. It’s not that we dont want to go, but with a busy job and life happening, why not put the kids in front of the 60 inch flat screen and just fire up Apple TV or Netflix?
Thus, there is the problem AMC faces. Do I miss the theater, absolutely. I miss the 2000 calorie gobs of butter popcorn and Extra large Dr. Pepper. It was a fun experience. But convenience is the industry disrupter these days and Netflix in convenient.
I like AMC stock as a short term play, ride it up to $13 perhaps but then I’m out....
I hate to see the demise of an American Icon like the movie theater, but unfortunately times change.
Blockbuster had a chance early in 2000 to take out Netflix and they didn’t. Now they are gone. What AMC is doing with movie pass is a big step forward but is it enough? Now Regal is offering a similar plan?
Has no debt
Is moving part of operations to Malaysia (latest earnings call) to avoid tariffs
Still has 30% gross margins
Still is the leader market share wise in consumer robotics
Stock price butchered by the 15% short interest
There is more upside than downside now. If you are short, your risk to the upside is an unexpected trade deal, Malaysia operations increase quicker than expected, or more pressure on the broad market and people go shopping for a discount, thus triggering the short squeeze.
Hang in there bulls, time will reward you
Trimmed position a tad and bought Puts. The market cap as of this very second is $912,580,000. With $5.3 Billion in Longterm debt, the enterprise value is about $6.3B. This is what an acquirer would have to pay to buy the company outright and own the company debt free.
And going off of 2018 full year cash flow from operations, at $523MM (assuming that at least holds), the company would have a cash flow yield of 8% for a prospective acquiring company.
I have to push back on the argument of the dividend getting cut only because I listened to the conference call and heard how capex will be cut in 2019. If this was not the case then I would argue yes they are probably cutting the dividend.
It’s a catch 22 if you are management.... Cut the dividend and watch the stock sink even further (but potentially rebound in the future) or cut capex to support the dividend but slow revenue growth down in the future.
I’m embarrassed to say I have not been to an IMAX or the “Premier” theaters but I hear they are nice. It sounds like those are where the capex spending has been going towards. Renovating the older theaters and converting them correct?
Anyways, puts in place at $8.50 in case I need them. Hope I dont!
AMC is a stock with a high degree of operating leverage. Gross profit is either great or terrible. The capex number according to the last earnings call will be cut in half, and they are expecting net profit of $3 per stubs subscriber / month. The real value in stubs is that those members bring friends and family who pay full price. With the full docket of good movies this year, everything from Fast & Furious, to Steven Kings “IT 2,” and even Star Wars in December, dont give up hope on Free CashFlow to equity turning around. I am wondering if the move to cut capex down to the $250MM range was so that they could keep the dividend. It makes perfect sense. A 9% div is almost an artificial put option at this point. Watch and see if the short start to cover themselves from having to pay 9% to the long shareholders as well as their margin interest to the Broker Dealer. Could get ugly if you are short at this point.