Could Cineplex (TSX:CGX) Soar like AMC?

Lately, AMC Entertainment Holdings (NYSE:AMC) has been making huge gains. Could Cineplex (TSX:CGX) be next?

| More on:
movies, theatre, popcorn

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

AMC Entertainment (NYSE:AMC) stock has been one of the best-performing assets of 2021. Up 2,785% for the year, it has truly soared. AMC has a legion of loyal investors willing to pump it on Reddit and Twitter, which has led to it defying Wall Street’s expectations. In fact, AMC investors have caused Wall Street to experience some actual losses. According to a Reuters article, shorts lost $512 million in a single trading day this month.

It’s been a wild ride — no question about it. And it leads naturally to the question, “Could another movie theatre stock be next?”

Certainly, most movie theatre chains are in about the same boat that AMC is in. That is to say, they’re currently suffering depressed revenue but are certain to recover when the pandemic is over. Just recently, the film F9 had a record-setting opening weekend, signaling the return to normal life for movie theatre companies. If that benefits AMC then it probably benefits companies like Cineplex (TSX:CGX) as well. In this article, I’ll explore whether Cineplex has the potential to rally like AMC did, or whether it will deliver much more tepid returns.

How Cineplex is similar to AMC

Cineplex shares many similarities with AMC:

  • It’s a movie theatre chain.
  • Its revenue abruptly collapsed in 2020.
  • It is expected to see revenue surge in 2021 with the post-pandemic recovery.

In 2020, AMC saw its revenue decline from $5.4 billion to $1.2 billion. In Cineplex’s case, it was from $700 million to $132 million. The decline was similar in percentage terms (77.7% for AMC; 81% for Cineplex), yet one company’s stock has rallied out of control this year, while the other has risen much less. In the next section, I’ll explore why that’s the case, and why, ultimately, Cineplex probably will not become a meme stock like AMC.

How it’s different

Despite all the similarities it shares with AMC, Cineplex is very different in other ways. Here are the most important ones:

  • Cineplex is not a “meme stock” getting massive amounts of coverage on Reddit.
  • Cineplex is based in Canada, which has generally had stricter and longer-lasting lockdown policies than the United States.
  • Cineplex has not received massive cash inflows from equity sales like AMC has, and may therefore have a harder time staying solvent.

Given these differences, it appears unlikely that Cineplex will become the next AMC. It is very similar as a business, but it has not received the kind of social media hype that — let’s be honest — is responsible for most of AMC’s gains this year.

There is one interesting thing to note, though.

Cineplex does appear to be a decent candidate for a short squeeze. About 25% of its trading volume is short according to, which would result in a pretty big spike when shorts are forced to cover. That’s something investors could keep in mind when considering going long CGX. However, shorts still have over 100 days to cover, so you can’t reasonably expect a squeeze to occur anytime soon.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Twitter. The Motley Fool recommends CINEPLEX INC.

More on Dividend Stocks

edit Back view of hugging couple standing with real estate agent in front of house for sale
Dividend Stocks

Why Real Estate Stocks Are a No-Brainer Addition to Your Portfolio

Real estate stocks, especially REITs, offer some distinct advantages over other types of stocks, making them must-have additions to most…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Top TSX Dividend Stocks to Buy for Monthly Passive Income

Top TSX stocks with monthly dividends now trade at cheap prices for investors seeking passive income.

Read more »

Canadian Dollars
Dividend Stocks

Create Free Passive Income and Turn it Into Thousands With 1 TSX Stock

If you can't afford to invest, you can certainly create passive income another way and use that to invest in…

Read more »

Payday ringed on a calendar
Dividend Stocks

Canadian Dividend Investors: 2 ETFs That Pay Monthly Income With High Yields

Dividend ETFs often pay out monthly distributions compared to dividend stocks.

Read more »

think thought consider
Dividend Stocks

2 Stocks I Own and Will Buy More of if They Fall

Stocks tend to go up in the long run. Therefore, buying a basket of diversified stocks on dips should lead…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

2 Oversold TSX Dividend Stocks to Buy for Passive Income

Blue-chip dividend stocks such as Royal Bank of Canada and Manulife Financial pay investors a tasty forward yield.

Read more »

TFSA and coins
Dividend Stocks

TFSA Passive Income: 3 Solid Stocks to Earn $355 Every Month

Looking to earn steady passive income? Here are three solid TSX stocks that can help you earn a worry-free passive…

Read more »

Dividend Stocks

RRSP Investors: 2 Stocks to Buy in August for Dividends and Capital Gains

RRSP investors can still find top TSX dividend stocks trading at cheap prices today for a buy-and-hold portfolio.

Read more »