The second-quarter earnings season is beginning to tap the brakes, but there are still several closely watched companies on deck to release their most-recent results. For this week, that group includes Reddit-favorite AMC Entertainment Holdings, Inc. (AMC), which unveiled its second-quarter earnings results Monday afternoon.
So, how did AMC’s numbers stack up?
AMC beat on the top and the bottom line, and it is seeing some growth from a year ago. For the second quarter, earnings increased 86.8% year-over-year to an earnings loss of $0.71 per share, up from an earnings loss of $5.38 per share in the second quarter of 2020. Analysts were calling for an earnings loss of $0.94, so the company posted a 26% earnings surprise. Revenue surged 2,253% year-over-year to $444.7 million, up from $18.9 million in the same quarter a year ago. Analysts were expecting revenue of $382 million, so AMC topped expectations by 16.4%.
During the conference call, company management also announced that folks will be able to use bitcoin to buy tickets and concessions online by year end.
At first blush, this report looks great. But here’s the reality: That $0.71 per share loss was well below earnings per share of $0.17 in the second quarter of 2019. In addition, the $444.7 million in revenue was a far cry from the $1.5 billion in revenue the company made in the second quarter of 2019.
And while accepting bitcoin as payment sounds exciting, bitcoin’s transaction costs are typically quite high. Currently, the average transaction fee stands at about $2.50. If one adult movie ticket costs $13.69, then the total cost with the transaction fee is $16.19 per ticket. So, the question becomes: Who pays for the added cost? AMC or the customer?
There’s also been some environmental pushback against bitcoin. We saw this play out with Tesla (TSLA) just a few months ago. Back in March, Tesla revealed that it would accept bitcoin as payment. But then in May, Tesla CEO Elon Musk reversed course and banned it. He tweeted, “Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.”
In late June, China began reinforcing its cryptocurrency ban. Specifically, China’s four biggest banks refused to help its customers trade bitcoin and other cryptocurrencies. It spooked the cryptocurrency market and triggered a big selloff in bitcoin. This has accelerated the cryptocurrency crash this year and caused an estimated $1.3 trillion in losses.
Bitcoin aside, the COVID-19 Delta variant is also serving as a headwind for the entertainment industry. Based on a National Research Group survey, the comfort level of watching a movie in theaters during the pandemic fell from 81% to 72% between July 11 and August 1 due to the spread of the COVID-19 Delta variant. This discomfort translated into disappointing box office numbers, with last weekend’s release of The Suicide Squad bringing in just $26.5 million across 4,002 U.S. theaters.
That’s a problem.
And it’s clear investors are concerned about these issues, too. While AMC soared more than 9% out of the gate this morning, that strength tailed off later in the day.
The bottom line: I wouldn’t get too excited about AMC’s second-quarter earnings.
It will be interesting to see if Wall Street has a similar reaction to GameStop Corp.’s (GME) earnings (another Reddit favorite). The company is scheduled to release its results for its second quarter in fiscal year 2022 in early September. Currently, the analyst community expects an earnings loss of $0.66 per share, up from an earnings loss of $1.40 per share a year ago, on revenue of $1.12 billion.
Personally, I’m more excited about what my Growth Investor stocks have to say. The fact of the matter is it’s been a spectacular second-quarter earnings season for them. As I expected, my Growth Investor stocks have posted wave-after-wave of positive quarterly earnings. Out of the 53 companies that have reported their most-recent results, 32 companies have posted double-digit earnings surprises. In addition, the average earnings surprise is 22.3%. In comparison, the average S&P 500 earnings surprise is 17.1%, according to FactSet.
Many of these companies have seen their stock dropkicked and driven higher. Case in point: BioNTech SE (BNTX), which partnered with Pfizer (PFE) for a COVID-19 vaccine. BNTX posted a stunning second quarter on Monday, and its stock soared 15% to new highs. (I’ll share my in-depth review of the biotech company later in the week, so keep an eye on your email!)
So, if you’re looking for long-term growth, I recommend investing in fundamentally superior companies that are profitable and expected to continue growing. If you’re not sure where to look, then consider my Growth Investor stocks. I hand-pick each of the stocks that I add to my Growth Investor Buy Lists to ensure that my subscribers are invested in the crème de la crème. All of the stocks that I add to my Growth Investor Buy Lists must meet my strict criteria and receive top marks in Portfolio Grader.
I am constantly striving to include only the best stocks, and I believe I found three more last month. All three are defensive, high-dividend growth stocks that I anticipate will be incredibly resilient during the “dog days of summer” this August.
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Note: The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owned the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
BioNTech SE (BNTX)