I feel that AMC Entertainment Holdings (NYSE: AMC), Carnival (NYSE: CCL), and Simon Property Group (NYSE: SPG) are market leaders in industries experiencing disruption. I don’t think cinemas and shopping centers will ever regain their former glory. The cruise industry could be back to the fancy of consumers, but it won’t happen anytime soon. Let’s review the three stocks that I don’t see recovering in the coming year.
After shutting down for more than five months, AMC opened around 100 of its multiplexes last weekend. Its smaller peers have also followed suit. You would think there would be a crazy demand for a return to the movies, but there wasn’t. Less than a million people (or 0.3% of the country) returned to see a movie this weekend.
Things will get better. The movies people really want to see will start arriving in the coming weeks. But it won’t just be safety concerns or mask requirements that keep most people away from the corner multiplex. The migration to high-end home entertainment streaming has grown over the past five months. We’ve proven that we can pay $ 20 or more for a new version seen from the comfort of home – and the studio doesn’t have to share the box office with an exhibitor.
AMC will post better numbers than last weekend as it opens more screens and better movies arrive. However, I’m not sure if we’ll ever see ticket sales for 2019 (or any previous year for that matter) as a reboot.
The travel industry will take a long time to rebound, and cruise lines will bear the brunt of the setback. Cruise ship operators don’t have a lot of choice. Crossings out of the United States don’t leave until at least until November, and we’re already seeing some trips from some of Carnival’s smaller lines shifting to next year.
Analysts are broadening their forecast of losses for the industry in 2021. Three months ago, the pros on Wall Street believed Carnival would earn $ 1.48 per share in fiscal 2021. Two months ago, the forecast went down to a loss of $ 0.87 per share, and now it’s all down to a loss of $ 2.44 per share. The postponement of restart dates, the reduction in the number of ships in its fleet, and consumers rethinking what the experience of cruising with masks and social distancing will be like make this a tough sell in the short term.
As the world’s largest cruise line, Carnival cannot be fully amortized over the long term. Consumers may embrace different vacation patterns next year (or maybe just stay closer to home), but ocean cruises will inevitably return. This is just a recovery process that will take years, and Carnival’s stock is unlikely to rebound until the outlook for the industry improves.
Simon Property Group
The mall was dying before the pandemic and COVID-19 has just accelerated the migration to e-commerce. Simon Property Group is a giant shopping center operator structured like a REIT, but a landlord is as good as their tenants’ ability to pay – and these are scary times for brick and mortar retail. Many chains are distorting and survivors are improving in online sales, which will make paying high rents in shopping centers less necessary in the future.
There’s a lot riding on Simon as a dividend-paying stock with his current 7.8% yield, but is it sustainable? Profits have been well below analysts’ expectations in consecutive quarters. Mall operators are trying to bail out their tenants by bidding on bankrupt chains, but does that make sense to you? It’s a conflict of interest at best. In the worst case, it jumps out of the frying pan and into quicksand.