Stock Growth on Rumors of Amazon To Buy AMC, Potential Big Acquisition

The world's largest movie theater chain, AMC Entertainment, has been in the news recently due to reports of a potential acquisition by Amazon. Amazon to buy AMC move pointing on amazon willing to project on theaters its content and services. The company views a potential acquisition of AMC as a means of obtaining brick-and-mortar "marketing weigh stations" that could be used to promote Amazon Prime movies in addition to cross-selling other Amazon services through the distribution hubs.

While media reports or rumors about a significant change in a company's business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision. AMC is expected to post a loss of $0.18 per share for the current quarter, representing a year-over-year change of +65.4%. For the current fiscal year, the consensus earnings estimate of -$0.41 points to a change of +55.9% from the prior year. For the next fiscal year, the consensus earnings estimate of -$0.33 indicates a change of +20.1% from what AMC Entertainment is expected to report a year ago.

When it comes to revenue growth, the consensus sales estimate for the current quarter of $928.03 million indicates a year-over-year change of +18.1%. For the current and next fiscal years, $4.44 billion and $4.74 billion estimates indicate +13.6% and +6.7% changes, respectively.

AMC's stock rose over 13% following the report and closed at $5.15 per share with a market cap of about $2.67 billion. The company has struggled financially as consumers have returned slowly to cinemas following the Covid-19 pandemic.

The Intersect reported that discussions are fluid and it's unclear whether Amazon will make an offer to buy the world's largest theater chain. FOX Business’ Charles Gasparino confirmed that Amazon "has long considered a possible purchase" of AMC but "for various reasons hasn’t pulled the trigger." He added that Amazon is primarily interested in the potential of buying AMC as "a distressed asset" and that there is no deal on the table and may never be.

AMC shares also jumped in 2021 on speculation of an Amazon acquisition that never materialized. At the time, the chain was swept up in a Reddit-inspired mania that sent its stock soaring. AMC theaters could serve as a platform for the 12 to 15 movies Amazon plans to release in cinemas annually.