Will Amazon Or Netflix Buy A Movie Theater Chain?
AMC Entertainment Holdings Inc (NYSE:AMC) has experienced major volatility in recent weeks on rumors that Amazon.com, Inc. (NASDAQ:AMZN) is potentially interested in a buyout of the popular movie theater chain.
On Friday, BofA Securities analyst Nat Schindler said a theater buyout actually makes sense — and Amazon may not be the only tech company interested.
Schindler said Amazon and even Netflix, Inc. (NASDAQ:NFLX) may be looking to take advantage of depressed theater valuations to follow the omnichannel blueprint of Amazon’s buyout of grocery store chain Whole Foods.
While streaming video has been a major disruptor for movie theaters, there are still more than 1 billion box office tickets sold per year in the U.S. and Canadian markets, and the average moviegoer attends more than four screenings per year.
3 Reasons A Deal Makes Sense
Schindler said there are three reasons why Amazon and Netflix may be taking a closer look at movie theaters.
First, Amazon and Netflix are now both producing original movies at scale. For example, Netflix produced about 60 movies in 2019. Second, the COVID-19 outbreak has movie theater stocks trading at distressed valuations. Finally, the potential bundling of movie theater access to a streaming service subscription could differentiate one streaming service as the number of competing services continues to rise.
Despite the potential advantages, Schindler said a theater buyout is simply possible rather than probable at this point.
“We see risk, with the acquisition of even a mid-sized chain likely needing to drive 3mn+ incremental subs to generate positive ROI, on our estimates.”
If movie theaters were ever a part of the plan for either Netflix or Amazon, now is the time to act with theater valuations in the gutter.
In addition to AMC, which has a $441.2-million market cap, other theater stocks that could be potential buyout targets include Cineworld Group plc (OTC:CNNWF), Cinemark Holdings, Inc. (NYSE:CNK) and Cineplex Inc (OTC:CPXGF).
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Photo courtesy of Netflix.
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