It’s definitely risky to invest in global movie-theater chain AMC Entertainment (NYSE:AMC). However, a small-sized position in AMC stock could pay off big time. Despite the economy’s ongoing challenges, AMC Entertainment is on the cusp of a comeback with successful film franchises and a potential path to profitability.
Sure, you can just buy shares of AMC Entertainment and/or AMC Preferred Equity Units (NYSE:APE) if you like to trade meme stocks. As a serious long-term investor, however, you need to consider the viability of the company.
AMC Entertainment is viable, and there’s recent data to show that the company’s financials are improving. The road to recovery won’t be quick for AMC Entertainment. Nevertheless, investors can put $100 on the chopping block as this famous movie-theater chain works diligently to raise its revenue and reduce its debt load.
Hit Movie Franchises Could Boost AMC Stock
AMC Entertainment Chairman and CEO Adam Aron made no bones about it. His company raked in robust revenue during 2023’s first quarter, mainly because of the success of a handful of film franchises.
Aron specifically cited the Ant-Man, Avatar, John Wick and Scream movie franchises as strong box-office draws during the first quarter. These and other blockbusters helped AMC Entertainment bring “nearly 48 million guests” into the company’s theaters in Q1, Aron stated.
Consequently, AMC Entertainment’s revenue increased 21.5% year-over-year to $954.4 million — not too shabby. Furthermore, AMC reported an adjusted net loss of $179.7 million in Q1 2023. This indicates a notable improvement over the $266.3 million loss from the year-earlier quarter. Also, on an adjusted diluted per-share basis, AMC Entertainment’s loss of 13 cents was only half of the year-earlier quarter’s per-share loss of 26 cents.
AMC Entertainment Shrinks Its Debt Load
No doubt, it was a controversial move for AMC Entertainment to issue APE units to shore up the company’s capital position. Yet, this strategy appears to be working in AMC’s favor in 2023.
Aron emphasized that, in 2023’s first quarter, AMC Entertainment strengthened its balance sheet by raising over “$155 million of cash through the sale of APE units.” Moreover, the company reduced the principal balance of its debt “by more than $200 million in repurchasing debt or exchanging APE units for debt.”
These moves contributed to AMC Entertainment having $703.7 million worth of available liquidity as of March 31. Of course, I’m not suggesting that AMC will be debt-free tomorrow or next week. I don’t suppose that Aron is suggesting this, either. The point is that AMC Entertainment is at least heading in the right direction, financially speaking. It’s encouraging to see the company working tirelessly to shore up its balance sheet this year.
So, Here’s Why Investors Should Bet $100 on AMC Stock
It’s definitely not a good idea to over-leverage yourself on shares of AMC Entertainment. The company is still unprofitable and hasn’t extinguished its debt load yet.
However, at least we can discern that AMC Entertainment is improving its financials. Plus, AMC can continue to thrive as long as the company draws moviegoers with successful film franchises.
So, don’t be afraid to invest in AMC Entertainment now. Just make sure that your position size is reasonable. Feel free to try out a $100 stake in AMC stock as an all-or-nothing bet for the rest of 2023.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.