Why It's Time for Most Investors to Sell AMC Entertainment Stock

By

May. 14 2021, Published 11:55 a.m. ET

AMC Entertainment (NYSE:AMC) shareholders have been riding the coattails of the GameStop short squeeze for a while now. However, the stock's volatility is also related to the nature of the movie theater business during the COVID-19 pandemic. As the CDC dramatically loosens the guidelines on wearing masks indoors and AMC sells hundreds of millions more shares, AMC is on the rise—which makes it a good time to sell for most investors.

Article continues below advertisement

If you bought AMC stock at the peak in late January, you might want to hold on a bit longer.  

WallStreetBets are users still pumping AMC stock following the short squeeze attempt.

Some WallStreetBets users have held onto their AMC shares for dear life, despite massive amounts of volatility over the last few months.

Article continues below advertisement

The recent price surge actually comes from a corporate event. AMC completed a share equity program in which it sold $428 million in new shares, which ultimately boosted the stock 28.5 percent since the day of the announcement.

This week alone, AMC shares have swelled more than 41 percent, which is major compensation for the 72.4 percent dip that occurred from late January to early February. 

Article continues below advertisement

Many AMC shareholders are in the green with new stock valuation

By mid-morning on May 14, AMC shares hit $14.28 a pop. That's still 28.6 percent lower than the Jan. 27 peak of $19.90, but that peak only lasted about a day. The stock's current valuation is the second-highest point over the last 12 months, which means frenzied investors who tapped in amid the hype can confidently exit in the green. Investors who bought in at or near the $19.90 price still have a ways to go.

AMC stock isn't undervalued now.

If you take a peek at the long-term vantage point on the AMC stock chart, you'll see that shares were struggling well before the COVID-19 pandemic came into focus. In April, analysts predicted a 48 percent surge for a target price of $13.84 and shareholders have hit that target.

Article continues below advertisement

AMC stock forecast

What will AMC stock look like in the future? The forecast doesn't report major growth, especially given the company's most recent earnings. According to the report, AMC burned through $312.9 million in cash during the first quarter. Even with indoor gatherings on the mend, the company has a long way to climb.

Reddit users keep an eye on AMC stock's short interest

Despite the positive influx of new AMC shares, the short interest for the stock is up 27.19 percent from the previous month. That amounts to $878 million, which is an estimated tenth of the company's current market capitalization. Rising short interest means investors will have to work harder to increase the stock's price over time.

Buying or selling AMC stock depends when you bought in

Aside from those who purchased shares at the Jan. 27 peak, it looks like a solid time to exit the AMC position. While easing restrictions are a good sign, there are still many unknowns in terms of AMC's financial health. Ultimately, knowing what price to sell at depends on the price you bought in.

Advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.