Should AMC Dip Its Toes in Crypto?

It’s been a weird year for theater chain AMC (NYSE: AMC). It was among the first meme stocks. It was finally allowed to restart operations everywhere, after spending most of 2020 in some degree of closure.

Now, the company has a massive war chest. Some are already making suggestions. One growing in volume is that AMC should join the ranks of the major crypto stocks.

Is buying Bitcoin the best strategy for AMC? Right now, I’m bullish on AMC because the company seems to be making a comeback after the closures of 2020. However, there are better things the company could do with its huge cash savings.

AMC’s year got off to a big start, and stayed big ever since. It began the year struggling to stay off $0 per share, managing to do so only by the slimmest of margins. Then its rise as a meme stock began in late January.

In just one day in late January, the company’s share price nearly quadrupled. It didn’t hold that level long, however, and was back in single-digit territory as February arrived. Then, the company plateaued for a while, holding within a few dollars of $10 per share.

That plateau held out until late May, when the company exploded and its share price increased around five-fold in around 10 days’ time. Slumps and recoveries immediately followed, but the recoveries never seemed to be quite as high each time. That brings us to today, where AMC is currently trading under $30 per share.

That follows a shocking revelation that AMC currently has $1.7 billion in cash and “long-term investments” on hand. For a company that seemed on the brink of disaster just a few months ago, that’s quite a revelation indeed. It’s also got a lot of people speculating as to just what AMC should do with that kind of money.

Some are suggesting that AMC put at least some of that cash into Bitcoin, a move that several other companies have already made. Companies from Tesla (TSLA) to Microstrategy (MSTR) have made Bitcoin holdings part of their balance sheets.

Wall Street’s Take

Turning to Wall Street, AMC has a Moderate Sell consensus rating. That’s based on two Holds and two Sells assigned in the past three months. The average AMC price target of $8.17 implies 71.2% downside potential.

Analyst price targets range from a low of $1 per share to a high of $16 per share.

Bitcoin No, Massive Revamp Yes

There’s a case for making a big cryptocurrency investment. It’s attractive. It calls in potential new investors who want a cheap way to buy in on Bitcoin, without having to shell out five figures to pick up a Bitcoin themselves.

Moreover, it makes the company that makes that investment look tech-savvy. That has a draw in a business climate that values image on the same list as strong fundamentals.

Here’s the bigger issue, though. Movie theaters in general have been losing ground for years. The coronavirus’ emergence and subsequent lockdowns really were just one more nail in the coffin.

Customers were increasingly preferring staying home with streaming video to going to the movies. Improving home theater quality and easier access to content made streaming a natural pick. Now, with an actual health motive involved, the problem is that much worse.

Before the coronavirus hit, though, some theaters were making moves to keep their platform alive. Fundamentally revamping the concept, theaters added such special features as rumble seating to further immerse viewers.

Theaters upgraded their concession stands, with some serving full meals, even alcohol. Moreover, some theaters added daycare options to allow harried parents a chance to enjoy a movie in peace while keeping their children safe.

However, it’s also worth pointing out that AMC canceled its dividend back in 2020 as the pandemic was starting up in earnest. AMC’s dividend history shows that it used to have one, and it used to be pretty reliable.

Restarting the dividend plan would be welcome to investors. Also, it would be a nice reward for staying with the company through perhaps its worst years ever.

Concluding Views

Buying some Bitcoin wouldn’t be a bad idea. There’s room for this cryptocurrency to go up. AMC has a good slug of spare cash and it’s starting to look like the movies are coming back. Just look at Spider-Man: No Way Home and its $601-million global debut. People desperate for a shot of 2019 are making their way back to the movies.

AMC should buy a little cryptocurrency. However, more than anything, it should probably be looking into those capital improvements. Streaming video has taken a lot out of the theater.

Only the “theater experience” can truly save theaters now. With $1.7 billion on hand, AMC could make a lot of improvements to that experience, and potentially future-proof its business model.

I’m bullish on AMC right now for its sheer potential, but keep a close eye on this one. It’s got the game ball in its hand right now… but can it keep it there?

Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.