If I’d invested £500 in AMC Entertainment shares 1 year ago, here’s how much I’d have now!

AMC Entertainment Shares (NYSE:AMC) have fallen 80% in 2022, making it one of the worst-performing US stocks. So what fell behind, and I should consider this tarnished entertainment stock for my portfolio?

Meme status

AMC is an American cinema chain. They own, operate, or have interests in movie theaters primarily located in the United States and Europe.

The company was on the brink of bankruptcy in 2021, but was given a new lease by retail investors.

AMC became the so-called meme stock, because of that gained viral popularity due to its growing social sentiment. Investors flooded into the company in May 2021, sending the stock price soaring from $10 to over $50.

Today, the online share price is 5. Taking into account exchange rate fluctuations, if I had invested £500 in AMC a year ago, today I would only have £100. That would be a terrible return on my investment.

The problem remains

AMC plans several plans to increase capital to pay off debt and invest in acquisitions, theater upgrades, popcorn businesses and even gold mines after being saved by retail investors in 2021.

However, the company has struggled to post profits in recent quarters. Debt is the main problem here – about $5 billion, about twice the stock market cap.

This debt was mostly received before the pandemic, as it acquired several smaller theater chains and invested in upgrading their theaters and screens.

Now, the company has enough capital to cover the next few years. As of June 30, AMC had available liquidity of more than $1.17bn.

Another challenge includes the current lack of blockbuster movies. Analysts point out that the industry has only released four blockbuster films in the four months leading up to Christmas this year.

In comparison, in 2019, there are almost two dozen blockbuster-style films scheduled on the calendar. Star Wars: Rise of Skywalkergenerated $177m in domestic ticket sales in the first weekend alone.

Should I buy AMC shares?

Reports suggest that people are returning to cinemas and spending more on tickets and popcorn than before the pandemic. However, the long-term trend is not positive. Streaming services such as Netflix and Disney will continue to disrupt the movie industry.

Personally, there is too much bad news about this company for me to buy. The company has a disproportionately large debt load and the current economic environment, paired with a lack of blockbuster releases, makes the short-term outlook bleak.

I know some people will say you can’t replicate the movie theater experience at home, but I personally haven’t seen the need to go to a movie theater in years.

In fact, when I started writing this, I researched nearby theaters to see if there was anything I wanted to see. Other than Avatar 2Everyman Chelsea looks mainly showing old movies including Angel died and True love. Avatar 2 might be interesting, but it’s over three hours!

Because of this, I didn’t buy it. And I don’t see things getting any better.