After staging an impressive rally into the double-digits, shares of AMC Entertainment (NYSE:AMC) fell on no real news. The markets may have decided that the company is not worth more than $1 billion by market capitalization. Running traditional movie theatres is capital intensive, has lots of real estate assets on the balance sheet and is a slow or declining business.
Netflix (NASDAQ:NFLX) dominating the online streaming market is not new news. But Disney (NYSE:DIS) and AT&T’s Warner are both getting into the market. Apple (NASDAQ:AAPL) is doing so too, via Apple TV Plus. With all of these options, streaming suppliers face a crowded market but customers get more choice. They may very well stop going to theatres, which would hurt AMC’s business.
The record-breaking October success of Joker undermines this argument. With AMC stock paying a dividend of ~9%, value investors may bet on theatre traffic rebounding this year. And add more blockbuster movies coming, especially during the holiday period. All of these trends point to AMC’s undervaluation.
AMC’s debt is manageable and its dividend is not getting cut. This suggests that investors seeking value should buy some AMC stock.
Disclosure: the author owns shares of AMC.
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