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AMC is in 'secular decline' as Disney and other studios bypass movie theaters: veteran analyst

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Shares of AMC and other theater chains popped after Disney said its film production schedule is heating up. But the shrinking exclusivity window for new releases means the industry is in "secular decline," says one veteran media analyst. 

Disney, along with its earnings, announced that two films, "Free Guy" and “Shang-Chi and the Legend of the Ten Rings," will play only in theaters for 45 days before being available to stream. "Black Widow" and "Jungle Cruise" will have a simultaneous release in theaters and on Disney+, where subscribers can watch it for $30. Both are still a significant change from the three-month exclusivity window that used to benefit theaters. 

"There's going to be a lot of movies where you just say, I'll wait and see it at home, and the movie theater business economically, it means they're gonna make less money," said Rich Greenfield, partner at LightShed Partners, in an interview with Yahoo Finance Live. "This is one of the reasons we have a 'sell' rating on AMC." 

AMC is one of the so-called meme stocks heavily favored by Reddit traders. The shares have risen more than 500% this year, with #AMCSqueeze trending on Twitter earlier this week. AMC also said this week it had raised $428 million in a stock offering. In December, the theater chain's CEO warned it was running out of cash, before raising enough in January to declare bankruptcy "off the table." 

Greenfield isn't impressed. 

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"I know that the Reddit and Wall Street Bets mob is continuing to buy the stock like there's no tomorrow. But the reality is, the fundamental business is changing. AMC is now dramatically more expensive than the stock was pre-pandemic," he said. From the stock multiple, "you would think the movie theater business is the best business you've ever seen. In fact, it's in secular decline, and the secular decline is getting worse because studios like Disney are realizing you need to get movies sooner to streaming like Disney+ to drive subs." 

Greenfield also isn't alone. Of the eight Wall Street analysts who cover the stock, there's only one Buy rating, four Holds and three Sells. 

Domestic box office receipts may reach $4.2 billion this year, according to Box Office Pro data cited by Bloomberg, with the bulk coming in the second half. That's down from $11.3 billion in 2019, and a record $11.9 billion in 2018. 

Julie Hyman is the co-anchor of Yahoo Finance Live, weekdays 9am-11am ET.

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