Profit Pregame

How Disney May Be Giving a Huge Boost to One Short Squeeze Stock

One Unexpected Decision Could Have a Massive Impact

Earlier this week, Disney made an announcement that turned a lot of heads – and made short sellers very nervous, too.

What’s happening?

Back in early August, news first broke that actress Scarlett Johansson – star of this summer’s blockbuster Black Widow and numerous other Marvel Cinematic Universe films – had filed suit against The Walt Disney Company (DIS).

Johansson’s dispute centers around Disney’s decision to release Black Widow on its streaming service, Disney+, at the same time it premiered in theaters. This was allegedly a breach of contract, as Johansson claims to have assurances that the film would have a theatrical-only release.

With the fight to gain subscribers to a rash of new subscription streaming services reaching a fever pitch, the top names in the entertainment space are doing everything they can to attract new subscribers. And in Disney’s case, that includes making brand new movies available on its platform.

That’s why Disney’s decision this week to release the remainder of its 2021 films exclusively in theaters before making them available on Disney+ comes as a big surprise.

And it could be a massive boon for one of the year’s hottest stocks.

Where’s the money?

Many in the entertainment industry believed that Johansson’s lawsuit would fundamentally change the way contracts for actors and actresses are negotiated and written in the new world of hybrid theater and streaming releases.

While that is likely the case, Disney seems to have dodged the issue for now by committing to a 45-day theatrical-only release for the remainder of its slate of films in 2021.

That includes some titles with massive hype like West Side Story, The Last Duel, and Marvel’s Eternals.

The decision comes after the recent box office success of Marvel’s Shang-Chi, which raked in over $90 million in ticket sales over Labor Day weekend.

Disney executive Kareem Daniel, in announcing Disney’s plan for the rest of the year, added that “confidence in moviegoing continues to improve.”

Clearly, Disney is looking to capitalize on the growing demand of audiences to return to movie theaters.

While this is big news for Disney, perhaps the biggest winner from this development is AMC Entertainment Holdings, Inc. (AMC).

How do I get some?

While Black Widow still made more than $80 million from U.S. ticket sales during its opening weekend, theaters missed out on another $60 million in revenue from Disney+ subscribers who streamed the movie from home.

So big theater chains have to be thrilled about Disney’s decision to keep it’s biggest films strictly in theaters for a limited time, allowing them to capitalize on the excitement around them as much as possible.

For AMC, the news couldn’t have come at a much better time. After a rough July which saw its share price sink by roughly 48%, the stock has rallied strongly since the first week of August. Traders are piling back into the stock following the lull amid indications that theater sales are improving.

Meanwhile, the number of shares being shorted and short interest in AMC has grown over the last month. That creates a scenario in which, if AMC can attract more buyers with continued positive box office results, we could see another big short squeeze move up if the shorts are forced to cover.

It’s not written in stone, and there are a lot of moving parts that could still derail the stock, but the combination of big, theater-only premieres on the horizon and an increase in short positions could be a potent mix for those looking to make short squeeze profits on AMC.

Short Squeeze Opportunities are Heating Up

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