There’s a fire in the theater but no one’s running out… Why? Because no one’s inside them.

On Jan. 22, AMC announced that it raised $917m just in time to prevent a bankruptcy — sending its share up over 30%.

Don’t count on Wonder Woman to save theaters…

Over the past 17 years, ticket sales in the US and Canada have slowly declined from 1.57b in 2002 to 1.23b in 2017. Theaters made up for the loss by nearly doubling its ticket prices over the same time period.

AMC, the largest theater business in the US, had its already struggling business further impacted by COVID.

• 90% drop in sales in the third quarter of 2020 compared to the previous year.
• 75% drop in its stock at its lowest point in 2020.
• 25% of theaters remained temporarily closed at the end of Dec. 2021.

But theaters saw a sign of hope… Wonder Woman 1984, released on Xmas day, brought in $16.7m in its opening weekend.

• A success compared to the release of Tenet in Sept. 2020 — which brought in $9.5m (excluding labor day)
• A failure compared to the first Wonder Woman released in 2017 — which brought in $103m.

How far can $1b really last?

That depends… AMC stated that the money will last deep into 2021 but this will be based on…

• Speed of vaccination and further COVID lockdowns
• Post-COVID consumer behavior

COVID forced a change of habits — consumers are streaming more movies and studios are releasing more movies via their streaming service.

If these habits don’t reverse, theater sales may never move back to their pre-COVID numbers. Even if AMC can survive this, their balance sheet won’t be pretty.

They’ll be left paying massive amounts of interest on their $6b+ debt load. In the third quarter of 2020, AMC paid out $83m in interest, more than it made from admissions. They also owe $450m+ in rent to landlords.

For investors… Can you trust this recovery?

AMC burned ~$125m per month near the end of 2020. At this burn rate, if theater attendance doesn’t recover, AMC has enough cash for 7-8 months.

Even if theaters recover, it’s possible that their stocks might not. Investors will get a clearer picture of AMC’s recovery on its next earnings report — released on Feb. 25.

Learn more: Recapping AMC’s horrific 2020.