AMC Entertainment (AMC)

Theater company AMC Entertainment (NYSE:AMC) reported revenue ahead of Wall Streets expectations in Q3 CY2025, but sales fell by 3.6% year on year to $1.3 billion. Its non-GAAP loss of $0.21 per share was in line with analysts’ consensus estimates.

Company Overview

With a profile that was raised due to meme stock mania beginning in 2021, AMC Entertainment (NYSE:AMC) operates movie theaters primarily in the US and Europe.

Leisure facilities companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted their spending from "things" to "experiences". Leisure facilities seek to benefit but must innovate to do so because of the industry's high competition and capital intensity.

Competitors in the theater and cinema space include Cinemark (NYSE:CNK), IMAX (NYSE:IMAX), and private competitors such as Alamo Drafthouse Cinema and Landmark Theaters.

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, AMC Entertainment grew its sales at a 14% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. AMC Entertainment’s recent performance shows its demand has slowed as its annualized revenue growth of 1.8% over the last two years was below its five-year trend. Note that COVID hurt AMC Entertainment’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.

This quarter, AMC Entertainment’s revenue fell by 3.6% year on year to $1.3 billion but beat Wall Street’s estimates by 6.3%.

Looking ahead, sell-side analysts expect revenue to grow 8.9% over the next 12 months. While this projection suggests its newer products and services will spur better top-line performance, it is still below average for the sector.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

AMC Entertainment’s operating margin has risen over the last 12 months, but it still averaged negative 2.7% over the last two years. This is due to its large expense base and inefficient cost structure.

This quarter, AMC Entertainment generated an operating margin profit margin of 2.8%, down 2.6 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although AMC Entertainment’s full-year earnings are still negative, it reduced its losses and improved its EPS by 62% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.

In Q3, AMC Entertainment reported adjusted EPS of negative $0.21, down from negative $0.04 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 2.3%. Over the next 12 months, Wall Street expects AMC Entertainment to improve its earnings losses. Analysts forecast its full-year EPS of negative $0.97 will advance to negative $0.41.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Over the last two years, AMC Entertainment’s demanding reinvestments to stay relevant have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 9.2%, meaning it lit $9.20 of cash on fire for every $100 in revenue.

AMC Entertainment burned through $81.1 million of cash in Q3, equivalent to a negative 6.2% margin. The company’s cash burn was similar to its $92.2 million of lost cash in the same quarter last year.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

AMC Entertainment’s five-year average ROIC was negative 17.6%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer discretionary sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, AMC Entertainment’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

AMC Entertainment burned through $295.3 million of cash over the last year, and its $4.06 billion of debt exceeds the $365.8 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the AMC Entertainment’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of AMC Entertainment until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

We were impressed by how significantly AMC Entertainment blew past analysts’ EBITDA expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The stock remained flat at $2.52 immediately following the results.

Updated: December 4, 2025 at 10:40 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in AMC Entertainment.

AMC Entertainment doesn’t pass our quality test. To kick things off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company will continue generating shareholder value, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its cash burn raises the question of whether it can sustainably maintain growth.

AMC Entertainment’s EV-to-EBITDA ratio based on the next 12 months is 1.9x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $3.21 on the company (compared to the current share price of $2.33).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.