[Best Of 2021] Should Amazon Or Netflix Try To Acquire AMC?

This article was originally published on February 7, 2021 7:04 am It was one of the most read articles on Benzinga.com this year.

Every week, Benzinga conducts a survey to collect sentiment on what traders are most excited about, interested in or thinking about as they manage and build their personal portfolios.

This week we posed the following question to over 1,000 traders and investors regarding Amazon.com, Inc. AMZN, Netflix Inc NFLX and AMC Entertainment Holdings Inc AMC:

Over the next year, should Amazon or Netflix try to buy AMC?

• Amazon should buy AMC

• Netflix should buy AMC

• Neither should buy AMC

For starters — why might Amazon or Netflix look to purchase the ultra-depressed theater chain?

See also: How to Buy Amazon Stock

Our team reported in June 2020 how BofA Securities analyst Nat Schindler said a theater buyout made sense — and Amazon may not be the only tech company interested.

Schindler said Amazon and Netflix 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.

For market-share context — AMC is not only America’s largest theater chain by locations in the US but the largest in the world.
Following the recent, unheralded wave of retail investor interest in AMC amid the Reddit rally — and subsequent fall back to earth — it’s high time to ask the question once again: Does it make sense for Amazon or Netflix to make the move into the physical theater space?

For starters, with AMC shares trading around $7 for a corresponding market cap of $2.32 billion, along with an enterprise value of $11.35 billion, this valuation is a pittance for either of the FAANG tech giants. 

It can be said the financial risk to either Amazon or Netflix of an AMC M&A would be minimal at worst, with market caps of $1.69 trillion and $244 billion, respectively. 

This week’s study found 44% of respondents saying a Netflix-AMC M&A would make sense in 2021. 

In what particular ways could Netflix leverage AMC?

One respondent noted “in the midst of this pandemic, there’s no doubt we live in a world where it seems people want to have everything streamed in their homes, including the new film movies that come out in theaters. One idea is Netflix could operate AMC, and a number of their new releases would go to the theaters first, then a month or two later be on Netflix.

“Viewers who missed going to the movies, but are loyal fans of Netflix original films, will get the best of both worlds in the event of a Netflix-AMC M&A."

Many respondents also believe that people will still indeed want to go to the movies post-pandemic, families and couples most notably, and the ability to see Netflix-exclusive movies on the big screen could be a serious draw for feature film buffs with pent-up demand.

Next, 24% of respondents said Amazon should complete an M&A deal with AMC this year.

Many traders and investors who participated in our study said Amazon could make admission to theaters available as a Prime Video option.

Amazon chief Jeff Bezos announced in Thursday’s fourth-quarter earnings report that Amazon Prime membership has exceeded 150 million.

See Also: How To Buy Amazon Stock.

Finally, 32% percent of traders and investors told us Amazon and Netflix should both avoid acquiring AMC in 2021.

Many respondents were adamant the theater business wasn’t working financially before the pandemic, isn’t working now and won’t work anytime in the near term.

Another argument from traders and investors was it’s likely cheaper, and just makes more sense from a marketing perspective, for Netflix and Amazon to start a new theater company altogether than bothering to rescue AMC and their outstanding debt through an M&A deal.

This survey was conducted by Benzinga in February 2021 and included the responses of a diverse population of adults 18 or older.

Opting into the survey was completely voluntary, with no incentives offered to potential respondents. The study reflects results from over 1,000 adults.

Image Credit: By Mark Goebel, via Wikimedia Commons