Profit Pregame

Why AMC’s Stock Offering Gets Two Thumbs Down

AMC Needs Big Bucks or It’s Curtains

The world’s largest movie theater company is making a new stock offering in a bid to stave off bankruptcy. But will it be enough?

What’s happening?

The COVID-19 pandemic has created huge issues for so many companies over the course of this year. Few more so than those companies that depend on large crowds.

So, it should come as no surprise that movie theater companies have been among the most beaten-down stocks of 2020. Even the largest cinema operator has been forced to take drastic measures…

AMC Entertainment Holdings, Inc. (AMC) has announced that it plans to offer up to 50 million new shares of its common stock in an effort to raise much-needed funds to stay afloat. AMC has stated that its goal is to raise $750 million.

But even with this optimistic new offering, it may not be enough to keep AMC in the black. In their filing, AMC warned that it may still need to perform a restructuring at some point, which would wipe out their investors.

Where’s the money?

You know I love buying up stocks at a big discount, and AMC shares are just that, down roughly 81% from their September 2019 highs.

But while movie theaters may have huge comeback potential as multiple vaccines start to roll out, this is likely one bargain I’m going to pass on – not just because of the risk of bankruptcy, but also due to the trend I see developing in the entertainment industry.

While folks have been forced to stay home this year to avoid getting sick, the entertainment industry pivoted its focus to upgrading streaming applications that customers can watch from practically anywhere. And I think that the inroads those apps have made are here to stay.

Don’t get me wrong, people will still want to go to the movies again when they safely can. I just don’t think the demand is going to be at the same level as it was pre-COVID.

And there is huge risk in jumping in now. If I’m being honest, this is a company that I think could go out of business. I am one of the biggest movie-goers there is and there are literally two people in the theater any time I go these days. I’m unsure how AMC and others think they will ever make money between the rent and employees’ wages in these conditions.

But while this may not be a great opportunity, there are some other really fantastic plays you should consider…

How do I get some?

While timelines, distribution rules, and even the effectiveness of the COVID-19 vaccine on a large population are still in question, the smart move is to put your money where it’s proven to work best.

And few stocks have performed better in the COVID world than Zoom Video Communications, Inc. (ZM). Overall, the pandemic has been a huge blight, but early Zoom investors have been able to see a silver lining, as conditions created millions of new customers and users for the video conferencing platform.

Yes, people will ultimately start to return to office over the course of the next year, but the impact that Zoom has made on the way so many companies operate won’t be going away any time soon.

With ZM stock having pulled back a bit from its all-time high in late November, now may be the perfect time to get in on the industry leader in video conferencing.

In the Spotlight: Game On…

One of the market’s biggest success stories over the course of the pandemic has been the video game industry. Naturally, with people stuck at home and looking for ways to entertain themselves, many have turned to video gaming.

In the U.S. alone, video game sales exploded in 2020 – notching over $29.4 billion in sales, a 23% increase over last year. Sales of consoles and accessories have also seen double-digit increases since the pandemic began.

And with the next generation of gaming consoles having recently been releasing, there’s a lot more money to be made for the industry’s top players, and those that invest in them.

This is one of my favorite industries right now because it’s so red-hot. Keep an eye out right here for new trade recommendations on some of the best video gaming stocks around.

Another Big Opportunity on the Horizon

The video game industry has benefitted greatly over the course of 2020, and looks likely to continue its rise.

But one of the opportunities with the most potential in the coming months is crypto.

In fact, my colleague Tom Gentile just spilled the beans on a new way to play the microcurrency market in a brand new presentation.

To learn how he plans to beat Bitcoin by 20X, click right here.

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