Tag Archives: AMC

AMC Pops, Bitcoin Drops: Why We're Seeing Another Meme Stock-Crypto Reversion And What Comes Ne

An observation we've made in previous posts (e.g., AMC: Return Of The Meme Stock) was that the resurgence in meme stocks last spring came as Bitcoin sagged. That made sense, as the parabolic rally in Bitcoin and other cryptocurrencies earlier in the year had siphoned some of the speculative fervor out of meme stocks. So it may not have been entirely coincidental that AMC Entertainment Holdings, Inc. (NYSE:AMC) closed up nearly 9% on the same day Bitcoin (CRYPTO: BTC) dropped by double digits. But the proximate cause for the rally was most likely the news that weekend box office numbers for America's largest movie chain finally beat a pre-pandemic record.

A Top Name In April, And Again In August

AMC first hit our daily top ten names in April at $9.36 per share. It hit our top names list again in August again in August at $33.07.

Screen capture via Portfolio Armor on 8/12/2021.

Since August 12th, AMC was up 44.63% as of Tuesday's close.

Our time horizon for our top names is six months, so our subscribers who bought AMC in August are likely still long the stock. If you own it, we suggest you consider hedging it, in the event it pulls back significantly. You can use our website or our iPhone app to scan for optimal hedges.

Bitcoin Stumbles 

As Bitcoin prices topped $52,000 over the weekend, we anticipated taking a victory lap over the Riot Blockchain, Inc. (NASDAQ:RIOT) trade we wrote about at the end of July (A Hedged Bet On A Bitcoin Breakout). Instead, Bitcoin tanked on Tuesday, taking the Bitcoin miner down with it. As of Tuesday's close, RIOT was down 2.55% since our article. 

Chart

 

So why did Bitcoin drop? The short answer is no one knows. Maybe the most likely reason is that crypto traders bought the rumor of El Salvador President Nayib Bukele's promise to make Bitcoin legal tender there, and sold the news of its implementation. Despite some hiccups with Bitcoin wallets in El Salvador, the implementation went smoothly enough that Bitcoin Magazine's Aaron van Wirdum was able to buy his McDonald's breakfast in San Salvador with Bitcoin. 

So Much For The Republic of The Savior

As we wrote when President Bukele announced his plans to make Bitcoin legal tender in June (The Republic Of The Savior), El Salvador held some downside risks for the crypto currency:

Before Bitcoin maximalists imagine the rest of the world following El Salvador's example, they ought to acknowledge that El Salvador has a dollarized economy now. Without its own currency, it has nothing to lose by accepting Bitcoin; in contrast countries with their own currencies would be giving up the seigniorage that comes with it. The other thing they ought to acknowledge is that, for better or worse, El Salvador is now the poster boy for Bitcoin, and the lofty claims made about it. For a small taste of those claims, see the pinned tweet by MicroStrategy, Inc. (NASDAQ:MSTR) Michael Saylor below.

For an acknowledgement that El Salvador is now a poster boy for Bitcoin, see Balaji Srinivasan's tweet below,

Or Joe Wiesenthal's,

The challenge for Bitcoin enthusiasts is that El Salvador is, well, El Salvador. Salvadoran immigrants have struggled in the U.S., as Jason DeParle noted in a dispiriting New York Times article (“Struggling to Rise in Suburbs Where Failing Means Fitting In”). One might hope El Salvador's embrace of Bitcoin will attract talented immigrants to El Salvador, but that hope should be tempered by knowledge that El Salvador has the highest homicide rate in the world.

The chances are, the next rally in Bitcoin will be sparked by something other than positive news out of El Salvador. 

Will Support.com’s Hail Mary Hit the Target?

Support.com (NASDAQ:SPRT) holds its special meeting on Sept. 10 to vote on its merger with Greenridge Generation Holdings. The merger’s acceptance requires that more than 50% of owners of SPRT stock vote to approve the deal.

The letters "M&A" on a wooden table, surrounded by a calculator and other business items. mergers and acquisitionsSource: Shutterstock.com

The two parties announced their merger on March 22. The day before the merger announcement, SPRT closed at $2.14. Now it’s trading at nearly $22. 

How many stocks do you know that have that kind of five-month performance? Very few. According to Finviz.com, out of 319 stocks that have doubled or better in 2021, SPRT is second best, trailing only AMC (NYSE:AMC). 

I’m no fan of the theater chain, but if forced at gunpoint to buy one of the two stocks, AMC wins hands down.   

The idea of bringing together a customer support business desperate for some value-add for its shareholders with a company that’s not sure if it’s an energy company or a Bitcoin (CCC:BTC-USD) operation is a worthwhile investment seems ludicrous. 

Yet, here we are, days from a vote that asks SPRT shareholders to believe one plus one really does equal three. 

It doesn’t. Here’s why. 

SPRT Stock Pre-Merger Announcement

Support.com went public in July 2000. It sold 4.25 million shares at $14 apiece. It got its start in December 1997. 

“We provide eBusiness infrastructure software that automates, personalizes and enhances user support over the Internet. Our eSupport software is designed to accelerate eBusiness growth and to increase customer satisfaction and retention,” states page 3 of its IPO prospectus. 

7 Healthcare Stocks to Buy Before $3.5 Trillion Floods In 

In 1999, it had $3.2 million in revenue and a $13.7 million operating loss. In 2020, it had $43.9 million in revenue and an operating profit of $52,000. Going back over its 10-k’s between 2001 and 2020, Support.com’s best year for sales was 2013 when it generated $88.2 million on the top line and a $10.8 million operating profit. That appears to be its best year for profits, too. 

In 2013, SPRT stock got as high as $17.22, or thereabouts. After that, it hadn’t come close until its massive surge in August. 

This is the first time I’ve covered the stock; I’ll assume most people already know that Greenridge is using the company to go public. It likely has no long-term interest in running a customer support business.

Think of SPRT as a special-special purpose acquisition company, or SSPAC. It adds little value to the equation. 

So, rather than 1+1=3, investors are likely hoping it’s more like 0.5+1.5=3. But I digress. 

An Energy Company or a Bitcoin Miner?

In mid-August, InvestorPlace’s Chris MacDonald discussed what Greenridge and Support.com bring to the table in their merger. 

“Greenridge reported it expects to end the 2021 calendar year with $50 million in EBITDA (earnings before interest, taxes, depreciation and amortization). The company expects this run rate to improve to $160 million by 2022,” MacDonald wrote on Aug. 13.

“As part of the deal, Support.com will provide $33 million to the combined entity. At closing, it’s expected investors in SPRT stock will have 8% of the merged company.”

As page 20 and 21 of the March presentation explaining the benefits of the merger points out, Greenridge’s EBITDA is expected to grow from $6 million as of February 2021 to $52 million in 2021, and $109 million in 2022. Those last two estimates are based on a Bitcoin price of $49,000.

In the latest 12 months ended February 2021, Greenridge had 17 MW (megawatts) capacity that mined 1,186 Bitcoins generating $26 million in revenue. 

On page 7, it points that the 26 MW mining capacity consists of 7,800 Bitcoin miners. That’s 300 miners per MW. Based on 17 MW, that’s 5,100 miners that produced 1,186 Bitcoin, or 0.23 Bitcoin per miner. So based on 85 MW mining capacity in 2022, we’re looking at 25,500 miners. Multiply that by 0.23 Bitcoin, and you get 5,865 Bitcoin produced in 2022. 

So, based on the 2022 estimated run rate, revenue will be $206 million, or $35,124 per bitcoin. Subtract the cost to mine one Bitcoin is $2,869; the profit potential is intriguing. 

Why, then, did it take Greenridge four years to get to $26 million in revenue? Does it have everything to do with the price of Bitcoin? Or is it because it originally intended to run the power plant as an energy company, but the rising price of Bitcoin made it pivot? 

We’ll probably never know the actual true story.

I can see the appeal for Support.com management and insiders to want this deal to go through. If it gets anywhere near the projections of revenue and EBITDA, the 4% stake (plus the 8% stake for its other shareholders) will be worth considerably more than if it continued operating as an internet customer support service provider.

It’s an excellent Hail Mary; I don’t know whether it will work or not. You’re on your own on this one. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

IMAX Management Talks Superheroes, Lasers, and International Opportunity

There was a lot to like when premium-format theater company IMAX (NYSE:IMAX) reported the financial results for its just-completed first quarter. Revenue of $85 million grew 23% year over year, adjusted earnings per share of $0.21 tripled compared to the prior-year quarter, and the company made significant headway on its initiatives to increase box office and margins while decreasing expenses.

Beyond the top and bottom lines, however, IMAX executives discussed several topics of interest to investors and outlined their optimism for the coming year. Find out why superheroes, a new laser projection system, and opportunities in international markets give them confidence in the business moving forward.

In a still from "Avengers: Infinity War," Thor, Star-Lord, and Gamora stand talking

Avengers: Infinity War broke records for IMAX. Image source: Disney.

We’re in the blockbuster business

During the conference call with analysts, IMAX CEO Rich Gelfond made the bold pronouncement: “Remember, IMAX is not an exhibitor. We are in the blockbuster business.” He said that content creators were increasingly favoring “big event films over smaller ones,” and this gives IMAX an edge compared to standard theaters.

That thesis played out with several recent superhero movie releases. Walt Disney’s (NYSE:DIS) Marvel Studios’ debut of Black Panther in February grossed $35 million at the box office at IMAX locations on its opening weekend, which IMAX said was a “record February global launch” for the company.

The pattern repeated with the release of Avengers: Infinity War, the latest installment in the Marvel canon. The first film shot entirely in IMAX cameras, it grossed $41.5 million in ticket sales, a record global launch for IMAX theaters.

Lasers

Last week, the company announced the launch of the IMAX with Laser projection system. This cutting-edge system, designed specifically for commercial multiplexes, reestablishes the company’s competitive advantage. It produces “noticeably sharper image with brighter whites, darker blacks, and a broader, more vivid color gamut.”

The company also recently debuted a new 12-channel immersive sound system that is generating positive responses from exhibitors. IMAX has already signed more than 150 agreements to install the groundbreaking new projector system, including an 87-system agreement with AMC Entertainment Holdings, Inc. (NYSE:AMC), and a 55-system deal with Cineworld Group’s Regal Entertainment.

A clapper board and film reels against a smoky, spotlit backdrop

IMAX is expanding movie technology. Image source: Getty Images.

The rest of the world

While most market watchers are focused on the stagnant nature of the North American box office, IMAX continues to focus on the substantial international marketplace.

India is one such market. Gelfond pointed out that the company has recently doubled its contracted theater count in the country to 40 systems over the previous 12 months. The potential is evident in the box-office results, which grew 144% year over year. The company is planning to remaster more films in Indian languages that will play well not only in India but in other select markets worldwide.

Saudi Arabia is another opportunity specifically addressed on the call. The conservative kingdom recently repealed a 35-year ban on movie theaters and is actively courting companies to fill the void. IMAX’s largest Middle East partner, VOX Cinemas, will be building the first IMAX theater in Riyadh Park. AMC Theatres, meanwhile, is planning to open 40 cinemas in Saudi Arabian cities in the coming five years; that number rises to 100 theaters across 25 cities by 2030. IMAX and AMC are currently in discussions concerning the placement of IMAX theaters in the kingdom.

What the future holds

It’s important to note that even with recent declines in domestic movie attendance, attendance at IMAX theaters has been growing. While overall box office in North America was down by 2% in the first quarter, IMAX sales increased by over 14% in its domestic market.

That statistic, as well as the opportunities outlined above, bode well for IMAX — and for its shareholders.