AMC's Stock Still In The Spotlight As Wall Street Digests Amazon Rumor

Movie theater chain AMC Entertainment Holdings Inc AMC is reportedly in the crosshairs of Amazon.com, Inc. AMZN as the e-commerce giant is looking to use it as a testing ground for its movies.

Why Cramer Thinks It Will Happen

AMC CEO Adam Aron is a "miracle worker" who could be working on a "miracle" by generating some value for investors through a buyout, according to Jim Cramer. The acquisition may not do much to help the movie theater chain over the long term, however, similar to Amazon's acquisition of Whole Foods.

All Amazon essentially did to change Whole Foods' business is the addition of lockers for delivery pickups, Cramer said: "They didn't do much."

See Also: PreMarket Prep Stock Of The Day: AMC Entertainment

Why Barrington Research Is Optimistic

The combined enterprise value of AMC is less than $5 billion with the majority of the value in the form of debt, Barrington Research analyst James Goss wrote in a note. As such, an acquisition by Amazon would "clearly be relatively modest."

Meanwhile, Dalian Wanda holds a 75% voting interest in AMC and its management involvement is "described as fairly passive." So the ultimate sale would be at their discretion.

From a regulatory point of view, Goss said Amazon buying AMC would pose fewer challenges than if one of the major studios was making the purchase. Amazon's ambitions to showcase its films on the big screen are "much smaller" and mostly focuses on TV series.

It remains to be seen if Amazon's control of a movie theater chain would generate long-term value given the ongoing COVID-19 threat and a questionable recovery in a post-pandemic world. Nevertheless, Goss said Amazon can throw AMC a "lifeline" backed by its own "compatible interests" and such a move would be an attractive option for investors.

AMC Price Action

After trading higher by more than 20% on Monday, shares of AMC Entertainment were trading higher by 2.8% at $5.47 on Tuesday afternoon.