Movie Theater Stocks Have Two Problems



Movie Theater Stocks Are Getting hammered today a sinner world group, which is the second largest theater chain in the world. Announced it is closing its theaters in the US and in the UK here in the US, it's regal cinemas in the UK. It's a world. So all told we're talking about more than six, hundred, fifty theaters roughly forty, five thousand employees who are going to be out of a job and the stock is down. Forty percent and. In sympathy I guess you could say shares of AMC, which is the largest movie theater chain. Down ten percents, cinemark down fifteen percent. We've seen sort of this drip drip drip of tentpole movies having their release date pushback. The latest James Bond movie which was supposed to come out this past April got pushed. November, and over the weekend was announced, it's getting pushed him next April and it's among other things Jason It is a reminder. Of how those big action tentpole movies Drive this business. Oh yeah, and I mean it's not just the theaters that are really feeling the pain today to write its. Properties which is A read that focuses on the entertainment arena in in general, but they have a lot of exposure to to movie theaters and in certainly a APR's feeling a little bit of that painted as well. Given given what we know. Is playing out in the movie theaters and you know when you look at cinema world, I mean. Into kind of the first thing. The first thing that made me think of it's kind of like kind of like Pluto, and Pluto was downgraded from planetary status like sin world is more like a Dwarf Planet. Now, like this isn't this isn't a world anymore this is really a company that's just struggling to figure out how to survive at this point because they've got to problems. They've. Got, two really big problems they got a supply problem and the demand problem and like noted with with the the actual releases having the content to get in those theaters. That's one problem. But then the other problem, obviously, the health concerns regarding the pandemic people just don't want to go sit in movie theater like like we used to and and so all of this is playing out. On these theaters big and small, and and when you you look at the cinema world's financials I mean they are facing the same problems as everyone else missing revenue falling off a cliff. They've got a slug of debt on the balance sheet eight and a half billion dollars and a half of that lease liabilities. But that speaks to the to the weight that that that those theaters can conserve right that drag that they can serve when when they're not being used in a theater is just like a restaurant is just like a retail store they're all of these high fixed costs in keeping those theatres open paying for those leases keeping them staffed and open. In. So you need traffic to go through them the more traffic that goes through the more profitable they become and that's great and good times. But in bad times as we're seeing now, just profitability just vanishes in I think the trouble. The. Trouble that they're facing. Is that you know when you start looking forward and try to figure out exactly how people are going to be feeling about going to the movie theater when all of this stuff passes over, I mean when when we finally turned the corner and in the concerns For Health aren't aren't the same as the are today are people. GonNa want to go back to the movie theaters like they did before I mean some will no doubt. But for all of the time that passes while we're not going to those movie theaters, all of the time that those theaters are suffering other forms of entertainment are are gaining right other. Forms of entertainment are becoming more and more an option, a nice substitute for folks whatever that may be You know all the way down to new ways of of catching movies, and so we're seeing we're seeing distributors figuring out new ways to get movies out there. We're seeing consumers figuring out new ways to actually watch movies and all of a sudden. A year from now and I mentioned this on on twitter earlier today all of a sudden you really have to be of that good enough risk in that like hey, you know what? It's not the movie theater but I'm sitting at home. I'm eating the pizza I'm watching a new movie that that's good enough for me and I'm okay with that I don't need to get my car go to a movie theater in. So all the more time that passes I think the more difficult it becomes for these theaters to really. Get back to where they once were in. Under. Unfortunately it feels like you know we're we're going to be dealing with this certainly for the rest of this year I mean granted only a couple of months left really few months left but I mean, you know going into twenty twenty one. I mean what does this look like when April or May comes around I don't know we don't know enough yet. But but when you look at central world itself I mean it's really silly United States seventy, five percent of their revenue comes from here. So what's going on here really matters to this business and right now it's just not looking good. Yeah and one of the thoughts I had when I was reading through this stuff this morning was. member. When Warren Buffett bought the Omaha World Herald. There was just sort of this sense. Like. For someone who is so rational in his investing it kind of seemed like he let nostalgia. Get the better of him and you know what he can do, whatever he wants his money although he did sell it. Earlier this year. But. It reminded me of that and I just thought I think there is a possibility where. Some, very wealthy person at some point in the next year or two just maybe not to by. AMC Holdings whole cloth but I wouldn't surprise me if someone was just like not now I love movies and I want this to survive and if it's if it's break, even that's all I care about but but other than other than. Sort of a very rich angel coming in given everything you just laid out with the business I mean. I like how you put it I mean. It's not just a demand. It's not just a supply and demand problem while I mean, Hey, listen apparently Jeffrey Katzenberg get some pretty deep pockets. I mean Chris are you thinking what I'm thinking Quigley theaters let me just rolls right off the tongue doesn't it qube theaters? Hey, it's a possibility. Anything. Positive.

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