Movie theater giant AMC Entertainment (
NYSE:AMC) spiked 23.7% in trading yesterday amid trading volume nearly three times normal levels. The stock even held onto some of those gains going into trading this morning and added some new ones all this session's own. While analysts are maintaining a cautious position, the biggest reason behind AMC's gains seems to be connected to the “meme trading” phenomenon that drove used video game retailer GameStop (
NYSE:GME) to huge new heights in recent months.
A Cultural Phenomenon Behind AMC Stock
There was little in the way of significant news about AMC theaters; much of the earlier news has already been digested as the company re-opens theaters in the wake of the Covid-19 pandemic and rapidly-increasing vaccination rates. AMC reported earnings last week, and it posted a loss as many expected, with first-quarter revenue down 84.2%. The company did narrow its loss-per-share figure, though, going from $2.22 to $1.42, but that's still little reason for gain. The company also recently raised $428 million in new equity capital following a at-the-market equity offering of 43 million shares, running an average price of $9.94 per share. Given that the current AMC Entertainment stock price is $13.12 as of this writing, those who bought in have already seen some gains.
The lack of any recent news did little to prevent social media, particularly Reddit's r/wallstreetbets, from calling for a new short squeeze target, this time AMC. By the time midday hit on Thursday, the stock had jumped 14.1%, and the gains continued into the closing bell. Meanwhile, GameStop—which had benefited from similar action in the past—gained a new 4.7%, and continued its own gains through the rest of the trading day.
Other theories suggest that recent departures from cryptocurrency staged after Elon Musk generated new developments in the field left crypto investors looking for a new potential upward track. Musk's recent Saturday Night Live appearance sent Dogecoin plummeting after he referred to it as “a hustle”, and his move to no longer accept Bitcoin for payment at Tesla (NASDAQ:TSLA) didn't help matters much either.
What Are Financial Analysts Saying About AMC Stock?
Financial analysts talking about AMC Entertainment stock, beyond the social media community, have been mostly restrained. Our latest research indicates that AMC not only has a consensus rating of “hold”, but has held that consensus rating for the last two years.
A year ago, the company had three “buy” ratings, six “hold” and five “sell” to its credit. Six months ago, that shifted to just one “buy”, along with five “hold” and five “sell.” Today, the rating stands at one “buy”, four “hold” and five “sell,” which would provide cases for holding or departing altogether.
The AMC Entertainment stock forecast, as revealed by currently-held price targets, isn't all that positive either. The current average target is $4.22, with a high of $13 and a low of just $1.
Recent movements haven't been kind to AMC either. There were some positive developments; B.Riley upgraded its coverage from “neutral” to “buy” in early April, and with it set the aforementioned high price target of $13. Additionally, Wedbush doubled its price target on the company from $2.50 to $5 back in early March.
However, Loop Capital reiterated its “sell” rating on April 7, UBS Group initiated coverage with a “sell” rating and no price target at all, and MKM Partners lowered the company from “neutral” to “sell”.
It's also worth noting that the company currently carries $5.5 billion in debt, a consequence of trying to stay afloat when theaters were closed by government mandate. Additionally, with reports that share dilution surged in that same interval—going from 100 million shares to 400 million—profitability might prove difficult for the company to generate for some time to come.
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