Daily Brief: AMC’s Earnings Were A Smash Hit In Their Own Right

Daily Brief: AMC’s Earnings Were A Smash Hit In Their Own Right

over 2 years ago3 mins

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Movie theater chain AMC Entertainment lifted the curtain on stellar quarterly earnings this week, setting the stage for some stock market drama on Tuesday.

What does this mean?

AMC’s second-quarter revenue and profit both came in ahead of investors’ expectations as more filmgoers than thought flocked back to theaters. Having been hard hit by the pandemic, the world’s largest movie chain now says it’ll stop losing money by the fourth quarter of 2021 – although that’s based on total US box office revenue rising rapidly to hit $5.2 billion this year, up from hundreds of millions currently.

AMC revenue

Still, AMC’s playing its part: under the terms of a recent deal with Warner Bros. Entertainment, the mergertastic movie studio’s new flicks next year will be available in AMC theatres for 45 days before streaming services can get their hands on them. That could bode well for future earnings – which might be why AMC’s stock price initially rose 6% on Tuesday.

AMC stock

Why should I care?

For markets: It’s not all smoke and mirrors.

January’s “meme stock” frenzy has helped leave AMC’s stock up over 1,500% this year – but the company’s taken advantage of this perhaps irrational increase to improve its fundamental financials. AMC sold new shares at an elevated price in June: now, with some $2 billion in the bank, it’s better placed to bounce back as economies (and malls) reopen, potentially justifying its higher valuation after all.

The bigger picture: Doubling down on the meme theme.

AMC’s embraced its retail stock star status. Having already offered shareholders free popcorn, it recently announced plans to accept payment in bitcoin by the end of the year. The success of this approach partly depends on bitcoin’s price subsequently rising – but if its 34% increase so far this quarter can be sustained, the movie theater chain may be onto something.

Bitcoin price, Q3 2021
Bitcoin price, Q3 2021

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SoftBank Reported A Smaller Profit And Sold Off Big Tech

SoftBank image

SoftBank’s latest quarterly update on Tuesday suggested the giant Japanese tech conglomerate probably has to shrink in order to grow.

What does this mean?

SoftBank’s profit was 40% lower last quarter than a year ago, thanks in part to the large stakes it owns in Chinese companies. The Chinese government has been cracking down on local firms with US-listed shares – and the effect on Didi’s share price, for instance, will have wiped out any windfall SoftBank got from the ride-hailing company going public in the first place.

Analysts didn’t know quite what to expect from SoftBank’s earnings: some correctly predicted some profit last quarter, while others had forecast a narrow loss. But all were agreed on the importance of share buybacks. With its record buyback program coming to an end, Softbank’s investors were hoping for another, especially given the stock’s recent weakness. The company, however, left them hanging.

SoftBank stock

Why should I care?

For markets: Selling signals may worry Big Tech backers.

SoftBank sold off most of its big US tech investments last quarter: it ditched $3.1 billion worth of Facebook, $1 billion of Microsoft, $575 million of Alphabet, and $382 million of Netflix shares, but largely stuck to its Amazon stock. What with bumper buybacks and racking up debt to fund new investments, SoftBank may have needed the cash to shore up its bank balance – but its actions may still give other investors pause for thought.

SoftBank debt load

For you personally: SoftBank cools on China – for now.

Perhaps unsurprisingly, SoftBank’s pausing its investments in the Chinese startup scene until the regulatory situation becomes clearer. Yet the company remains positive on China’s prospects in the long run. That’s a useful reminder that taking a long-term view doesn’t necessarily mean suffering through short-term hardship: ducking out of something for a while can simply let you buy back in at a more opportune moment.

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