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AMC Theaters warns it may not survive

Yahoo Finance’s Alexis Christoforous, Brian Sozzi, and Ines Ferre break down the market action for AMC.

Video Transcript

BRIAN SOZZI: Let's take a look at another company we are watching closely here at Yahoo Finance. AMC is in focus after the movie theater chain said that it may not be able to survive beyond this summer. Ines Ferre is back with the details. Ines, no more movie theaters? Come on.

INES FERRE: I know. I know. This-- the 8-K filing that this company filed is really eye-opening. So the company said that because of COVID-19, all theaters worldwide were temporarily closed. And it also said we are generating no revenue from admissions, food and beverages sales, or other revenue which represents substantially all of our revenue in cash flow from operations. Also saying that because of regulations, because of shelter in place and just uncertainty surrounding COVID, we cannot predict when or if our business will return to normal levels.

Year to date, the stock is down 28%. It had rallied in the last couple of weeks, you'll recall, when there was a rumor that perhaps Amazon could be buying out AMC. But look, movie theaters have a couple of problems that are going on. One of them is that they rely heavily on high capacity. So if you have social distancing and if you only have 25% or 30% of capacity at your theaters, that's not going to work for them.

Also there aren't many releases to begin with right now because so many of them have been pushed out. And you want to see the highest density places, like New York and Los Angeles, opening up movies. So a lot of the issue is because of COVID-19, already theaters were having problems before this. But this has only accelerated those problems.

BRIAN SOZZI: Ines, think-- thinking of this, and now I'm just envisioning Netflix's stock chart in my head. No wonder why the stock's up so much. Yeah, we've all been home watching Netflix at home. But if there are no more movie theaters, Netflix, Disney+, those are big winners.

INES FERRE: That's right. And movies are now going towards streaming. And that is a new model for these companies to just go direct to streaming.

BRIAN SOZZI: All right, Ines Ferre, thanks so much.

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