Movie stocks were not worth mentioning until 2021 when the movie theater chain AMC Entertainment (NYSE :AMC) has become a target of Reddit traders. Once they took possession of AMC’s shares, all bets were voided and the share price skyrocketed.
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Indeed, it would not be unreasonable to call 2021 the Year of the Meme Stock. Yet, will this wild phenomenon last forever?
Probably not. The retail crowds are fickle, and while they can now target AMC’s stockpile, they could quickly turn their attention to another shiny object.
This means that investors should find other reasons to own stocks. Maybe a famous family entertainment company could provide some motivation – no meme required.
A closer look at AMC’s actions
There is a part of AMC’s stock history that, in my opinion, is not covered often enough …
Yes, AMC’s stock was beaten at the start of the Covid-19 pandemic. But the share price was already in prolonged decline before this event. In fact, the stock had passed around $ 35 by December 2016. And before anyone had ever heard of Covid-19, the stock price had already fallen to around $ 7.
The decline in AMC stock prior to Covid-19 was most likely due to the emergence of digital content streaming. Either way, the share price collapsed again as the world locked in.
AMC stock fell below $ 2 in March 2020. In June of the same year, stocks managed to climb back above $ 7, only to crater again, hitting a low below $ 2 on second trading day of 2021. Then, at the end of January, an unexpected / miraculous event took place.
Reddit traders (and other retail participants) offered AMC sourcing, sending it to a near-term high of $ 20.36. The same happened again in June when another apparent contraction took stocks to a record high of $ 72.62.
Since then, AMC stock has returned to around $ 44. Now investors are wondering if they can count on social media traders to continue to support the share price. Or, perhaps, there is a more sensible reason to stay invested.
The family rate dominates
Walt disney (NYSE :DIS) and its stock struggled at the start of the Covid-19 pandemic, as fewer people frequented Disney theme parks and some were even forced to close temporarily. Fortunately, the company made the right choice by focusing on Disney +, a popular streaming service.
Disney also continued to do well at the box office. Recently, Disney’s Shang-Chi and the Legend of the Ten Rings was America’s highest-grossing film for the second week in a row, grossing $ 35 million. This is in addition to the over $ 75 million it grossed in its opening weekend, making it the second best opening of any movie in the Age of the Pandemic.
Which movie holds the top spot, you ask? Well, that would be Disney’s Black Widow, which grossed $ 80 million on its opening weekend in July.
The point is, family-friendly movies can get the whole family out of the house and into movie theaters. It’s bullish for Disney and for movie theater operators like AMC.
Disney to the rescue?
Disney said it has plans in place for exclusive theatrical release windows, ranging from 30 to 45 days, for the remainder of its 2021 film roster. It’s a wise move. Disney will take advantage of theatrical releases and then bring the movies to Disney +.
“As confidence in the cinema continues to improve, we look forward to entertaining audiences in theaters, while retaining the flexibility to give our Disney + subscribers the gift of Encanto this holiday season,” Disney Media & Entertainment Distribution president Kareem Daniel said in a press release.
I’m sure Encanto will be a wonderful movie, but the headline for investors is that this entertainment director has said that “confidence in cinema keeps improving”.
This should be encouraging for investors in AMC stocks. And with Disney committing to exclusive theatrical release windows, AMC and its shareholders should reap the rewards.
The basics of AMC’s actions
The meme-stock phenomenon has created some interesting and unexpected moves in some otherwise largely overlooked stocks. The AMC stock is a perfect example.
While this phenomenon may not last, recent moves by Disney have provided a real bullish case for AMC stocks. So hopefully shareholders won’t need to pray for a Reddit pump now.
At the date of publication, David Moadel had (directly or indirectly) no position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
David Moadel provided compelling content – and sometimes crossed the line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga and (of course) InvestorPlace.com. He is also a chief analyst and market researcher for Portfolio Wealth Global and hosts the popular YouTube financial channel Looking at the Markets.
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