Best Movie Stocks: Buy This, Not That
It’s no secret that the movie industry has been hit hard by the coronavirus pandemic. However, box office sales are on the rise again as economies around the world are gradually reopening.
If you’re wondering which companies are best positioned to profit from the massive comeback of movie theaters, then read on.
The best cinema actions
Here are some great movie stocks for investors to consider:
1. AMC Entertainment
AMC Entertainment (NYSE: AMC) presents itself as the largest chain of cinemas in the world. In a surprising turn of events, it is also among the top performing stocks of 2021.
AMC’s stock price soared in early 2021, thanks to a short squeeze, and the stock has become a favorite among retail investors on Reddit and other social media platforms. Its dismal performance linked to the pandemic in 2020 will likely lead to a surge in the company’s year-over-year sales in 2021, but significant challenges remain.
AMC Entertainment added an additional $ 1.5 billion to its existing $ 10 billion debt over the past year. Paying off that and a significant interest expense will be a challenge even if the movie chain sells more shares. The company lost $ 4.6 billion in 2020 – which is understandable in a pandemic – but it was not profitable in 2019 as well.
The other bad news about AMC is that it has become a stock meme, meaning the stock’s earnings have made its trading price separate from the company’s trading fundamentals. The movie industry is expected to recover significantly this year, but AMC stock is likely too volatile for most investors.
Basically, AMC retains its competitive strength. With the closing of competing theaters or facing significant operating pressures, AMC has been able to gain market share over the past year. He could emerge as one of the big winners if the movie industry experiences a stronger-than-expected recovery.
IMAX (NYSE: IMAX) is known for its proprietary display technology, which it licenses to operators, including AMC. The company has a lean business model and does not need to build or maintain theaters. IMAX licenses include the intellectual property and technology that enables big screens to broadcast movies.
Another competitive advantage is that the company’s high-end screens allow operators to charge higher ticket prices, as many moviegoers are willing to pay more for immersive experiences. This feature could become more and more valuable as movie chains face and adapt to competition from streaming services.
With the film industry increasingly revolving around big-budget, heavy-duty special-effects films that benefit from IMAX’s premium viewing format, the company is poised to play an important role in shaping the future of the industry. IMAX is also financially sound – given the effects of the pandemic – and has more cash than debt on its balance sheet.
3. The Walt Disney Company
The Walt Disney Company (NYSE: DIS) isn’t pure-play cinematic action, but few companies are better positioned to profit from it if the theater industry experiences a strong recovery. Before the pandemic, Disney dominated the box office, and the House of the Mouse will no doubt continue to shape the future of cinema.
The company released seven films in 2019 that grossed more than $ 1 billion at the global box office, and its films recorded more than $ 13 billion in total ticket sales that year. Getting back to that high rating will be a challenge, but Disney is well positioned to succeed. With its wealth of popular characters and mega-franchises, including the Marvel Cinematic Universe and Star wars, the company’s content stable is unmatched.
The diverse nature of Disney’s business makes the company a less risky investment than pure movie stocks. While the recovery in theaters is weaker than expected, the company’s popular Disney + streaming service should still allow it to benefit from the continued growth in demand for streaming media. Disney parks and resorts and media networks generally perform well too, in part because the media empire has many lucrative channels to monetize its characters and content.
Trends in the film industry
The coronavirus pandemic has caused large movie chains to shut down for months and operate at limited capacity for even longer. As these pressures ease and year-over-year box office revenue growth in 2021 is likely to be impressive, the movie industry faces significant long-term challenges.
The growth of streaming services is reducing the value proposition offered by theaters. Some large film production companies, including Disney, have chosen to release big movies not in theaters but through direct-to-consumer streaming channels. Other competing entertainment options include video games and social media.
Meanwhile, movie chains are offering new experiences, including better seating and dining. While they may differentiate the movie theater experience from home viewing, they are unlikely to replace the demand for streaming services.
Movie theater ticket sales are likely to skyrocket this year, and some movie theater stocks could perform well in 2021, but investors should approach the theater industry with caution.