Is AMC Stock a Trick or a Treat?

Halloween has arrived, and with it comes the thrill of knocking on doors, wondering if the treat at the end will be a chocolate bar or a handful of candy corn. The same holds true for investors eyeing AMC Entertainment (AMC -0.65%). The stock has taken a surprising turn this year, nearly doubling, but it has also plummeted 99% over the past five years. The question remains: is AMC a trick or a treat for investors?

AMC has faced numerous challenges over the years. The pandemic was particularly devastating for movie exhibitors, but even some of its competitors have posted profits and started paying dividends. Unfortunately, AMC has not turned a profit since 2018. The company's management has been a source of concern, with CEO Adam Aron embracing the meme stock frenzy and engaging in questionable practices such as NFT investments and unrelated ventures.

Management's heavy use of shareholder dilution through stock offerings has also contributed to the company's current state.

Despite these concerns, there are reasons to be optimistic about AMC's future. U.S. ticket sales are projected to exceed $10 billion this year, marking the first increase since 2019. Globally, more than five films are expected to earn over $1 billion at the box office. Studios that initially pushed digital delivery during the pandemic are now embracing theatrical releases as audiences return. AMC is benefiting from this trend through its loyalty program, AMC Stubs, and movie subscription service, AMC Stubs A-List.

Analysts now predict that AMC will close 2026 with three consecutive profitable quarters, marking the first such period since 2018. Margins are expected to widen, and profitability will likely outpace revenue growth. Content creators and audiences are returning to the theater experience, signaling a positive shift in the industry.

While there are still risks to consider, the potential for AMC to become a profitable, sustainable business is increasingly evident. The management team appears to be learning from past mistakes, and the company is well-positioned to take advantage of the growing demand for in-person movie experiences. For investors willing to overlook the past and focus on the future, AMC may be a promising treat rather than a trick.