AMC Stock Forecast Shows Volatility and an Uncertain Future
AMC stock is down 41 percent from its 52-week high. Why is AMC stock going down and will it go back up in the rest of 2021?
July 13 2021, Published 10:04 a.m. ET
AMC Entertainment (AMC) stock has been volatile in 2021. The stock is down in premarket trading on July 13 and is 41 percent below its 52-week high. Will AMC stock go back up and should you buy it now?
On July 12, AMC announced that nearly 3.2 million people saw movies at its theaters worldwide between July 8 and July 11, which includes 2.5 million people in the U.S. This was one of the busiest weekends the company has witnessed in the last 16 months. AMC also said that 8 of the top 10 busiest theaters in the U.S. over this weekend were AMCs.
Why AMC stock is going down
On July 12, AMC stock fell 8 percent despite the company reporting the highest weekend attendance at theaters since the COVID-19 pandemic started. The stock fell after Lightshed Partners analyst Rich Greenfield said that the movie theater chain is in deep trouble. Greenfield pointed out that AMC was losing money before the pandemic. He said that the record post-reopening statistics that the company is boasting are nowhere close to pre-pandemic levels.
Greenfield said that AMC will continue to shrink due to declining profits, significant debt, and limited funding options. The analyst has a target price of $1 on AMC stock. He thinks that the stock is significantly overvalued.
AMC stock on Reddit
AMC stock is still one of the most-mentioned stocks among retail investors on Reddit’s WallStreetBets forum. The stock has a short interest ratio of 17 percent, which suggests that AMC might be a target for a short squeeze.
Unlike most other U.S. firms, where institutional investors are the largest investors, AMC is currently majority-owned by retail investors. Redditors think that short-sellers on Wall Street will be forced to buy back their shares at a loss in the near future, which will drive the AMC stock price even higher. Meme traders are urging fellow retail investors to “buy the dip” and “hold the stock.”
Where will AMC be in five years?
Movie theater attendance isn’t expected to return to pre-pandemic levels for the foreseeable future. This is due to the shortening of a theatrical window and increased adoption of streaming services. I think that fewer people will go to movie theaters in 2025 compared to 2019 due to a consumer shift towards streaming services. AMC will also be hit hard since studios will release new films exclusively on streaming sites rather than in cinemas.
Will AMC stock go back up?
AMC stock can move higher in the near term amid the push from retail investors. However, the stock is expected to fall again after the burst of euphoria, which is normal in short squeezes.
AMC is a pump-and-dump scheme
AMC stock has gained 1,909 percent YTD and 910 percent over the last year. It has gone from being on the verge of bankruptcy in early January to a market capitalization of $22 billion. The significant rally in the stock has no fundamental basis. Apart from the pumping from bullish retail traders, there didn’t seem to be any other reason for the stock to reach new highs.