AMC stock may soon flash a golden cross, but one key risk remains

AMC Entertainment's stock price has staged a strong bull run this month, reaching its highest point since November last year.

It has jumped by 165% from its lowest point this year, and is about to form a golden cross pattern, which may hint at stronger gains ahead.

AMC stock nears golden cross pattern

Technicals suggest that the AMC share price has more room to run, especially if the golden cross pattern forms.

The daily chart shows that the spread between the 50-day and 200-day Exponential Moving Averages (EMA) has narrowed substantially, and the crossover may happen as the momentum continues.

The 50-day EMA stands at $1.70, while the 200-day is at $1.96. 

Other technical indicators point to more gains this year. For example, the Average Directional Index (ADX) has jumped to 41, its highest point since May 1 this year. It has also jumped above the key resistance level of $1.93, its highest point on April 17. 

Therefore, the most likely AMC stock forecast is bullish, with the next level to watch being at $3.15, its highest level in October last year. A drop below the key support level of $1.93 will invalidate the bullish view.

AMC stock chart | Source: TradingView

AMC is benefiting from the Box Office comeback, but dilution is a risk

The main reason behind the ongoing AMC stock rally is the ongoing rebound of the Box Office.

In a statement released earlier this month, the company said that it welcomed more than 4.2 million moviegoers to its US locations in May. 

Globally, the figure jumped to 25.5 million, the highest level since May 2019. This growth is a continuation of what has been happening this year, with titles like The Super Mario Galaxy, Michael, Project Hail Mary, The Devil Wears Prada 2, and Pegasus being among the most popular.

This growth will likely continue as several titles are expected to be released. This includes popular names like The Odyssey, Spider-Man: Brand New Day, Moana, and The Hunger Games.

AMC stock also rose after the company published its financial results. Its revenue rose to $1.04 billion in the first quarter from the $862 million it made last year. 

Its adjusted EBITDA improved to $38.3 million from a loss of $57.2 million in the same quarter last year. Also, it narrowed its losses, with its net loss improving to $117.1 million from the previous $201 million. 

Analysts are largely optimistic about the company, with the annual revenue expected to jump by 12% this year to $5.4 billion.

It is expected to jump to $5.7 billion next year, with the company expected to turn a net profit in 2027.

This view likely explains why the CEO recently bought shares worth over $344k. 

Still, the company has a major risk ahead: dilution. It recently completed its at-the-market raising of $150 million to boost its balance sheet.

Over time, AMC has boosted its outstanding shares from 58 million in 2023 to 605 million today.