April has not been a good month for AMC Entertainment’s (AMC) – Get AMC Entertainment Holdings, Inc. Class A Report stock. Shares have plunged nearly 50% since the month began. This performance is particularly disappointing because AMC investors watched the stock rise in March.
Let’s take an in-depth look at what is going on with AMC and why its stock has recently crered.
(Read more from Wall Street Memes: GameStop Stock: Ryan Cohen’s Clever Plan To Limit Shareholder Dilution)
Too Many Distractions
AMC shareholders are largely retail investors who got into the stock with the goals of beating short sellers at their own game and fighting for more transparency in the markets. They loosely organized their efforts on Reddit forums like r/wallstreetbets and r/shortsqueeze.
However, lately, other topics have stolen the limelight on these subreddits.
The soap opera that is Elon Musk’s acquisition of Twitter (TWTR) – Get Twitter, Inc. Report; the earning season for tech companies; and short squeezes in Aterian (ATTER) – Get Aterian Inc Report, Mullen (MULNN) and BitNile (NILE) have taken some of the focus off AMC.
As I write, AMC is only the 16th most-talked-about ticker on the main Reddit threads. Just last month, it was in the top 10.
Riding the Broader Market Trend
AMC’s performance has lately been in line with the broader market, with a few exceptions. Right now, we’re seeing the potential for a bear market, and stocks are reflecting this pessimism.
Stocks that tend to be highly volatile — such as AMC — naturally tend to see more exaggerated price swings than the rest of the market. See below for AMC’s performance compared to the SPDR S&P 500 ETF (SPY) – Get SPDR S&P 500 ETF Trust Report:
AMC’s spike in March was due largely to the company’s announcement that it had acquired a position in gold and silver miner Hycroft Mining (HYMC) . However, as the enthusiasm for the purchase has waned, AMC has returned to trading in line with the general market.
But it’s worth noting that, recently, YouTube personality Trey Collins of Trey’s Trades commented on AMC’s stock accumulation zones. This phenomenon indicates that, if a stock does not fall below a certain price level and then moves sideways for a period, shares are likely being accumulated by investors and may result in a bullish move soon.
The Bottom Line
Because AMC is trading in line with the broader market, its April decline likely has little to do with the company’s fundamentals. Instead it’s probably due to external factors.
AMC continues to have a high short interest of 19%, while the percentage of shares loaned remains equally high. Approximately $1.67 billion worth of AMC shares are being shorted, according to Ortex data. This shows that the stock remains quite dangerous for short sellers to bet against.
AMC still counts on some positive factors regarding its business. CEO Adam Aron has a concrete plan to resume the company’s growth after overcoming the worst phase in its history — aka the COVID pandemic.
With cash raised with shareholders’ help, AMC will focus on paying off debts, investing in the infrastructure of its core business, and acquiring new businesses — not necessarily in the entertainment industry.
Other than that, AMC’s main driving force is its meme factor. This transcends any fundamental questions of AMC’s business strategy, financial stats, and broad market trends. In fact, the meme factor could be reignited by any bullish spark over any news about the company generating FOMO (fear of missing out).
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)