What a brutal six months it’s been for AMC Entertainment. The stock has dropped 33% and now trades at $3.29, rattling many shareholders. This might have investors contemplating their next move.
Is there a buying opportunity in AMC Entertainment, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is AMC Entertainment Not Exciting?
Despite the more favorable entry price, we don't have much confidence in AMC Entertainment. Here are three reasons why we avoid AMC and a stock we'd rather own.
1. Revenue Spiraling Downwards
Reviewing a company’s long-term sales performance reveals insights into its 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’s demand was weak and its revenue declined by 2.7% per year. This was below our standards and signals it’s a lower quality business. 
2. Cash Burn Ignites Concerns
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
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 9.8%, meaning it lit $9.80 of cash on fire for every $100 in revenue.
3. Short Cash Runway Exposes Shareholders to Potential Dilution
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 $474.5 million of cash over the last year, and its $8.30 billion of debt exceeds the $378.7 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.
Final Judgment
AMC Entertainment isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 2.4× forward EV-to-EBITDA (or $3.29 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at the most dominant software business in the world.
Stocks We Like More Than AMC Entertainment
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
