AMC stock price forecast: buy, sell, or hold?

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on Jun 7, 2024
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  • AMC Entertainment’s shares have bounced back in the past few weeks.
  • The company has benefited from the ongoing meme stock frenzy.
  • The risk is that AMC will dilute its shareholders more this year.

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AMC Entertainment (NYSE: AMC) stock price has crawled back in the past few weeks, helped by the meme stock frenzy. It has jumped to $5.80 from the year-to-date low of $2.40. This recovery has brought its market cap to over $1.9 billion, much higher than this year’s low of less than $900 million. 

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Meme stock frenzy continues

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AMC Entertainment has gone through a major short squeeze recently, helped by the return of the Roaring Kitty, who is well-known for his role in Wall Street Bets. He has now become one of the wealthiest traders in the US, because of his investments in companies like GameStop.

AMC’s stock surge has helped the company handle some of its problems. In May, it completed its stock sale, raising millions of dollars and boosting the amount of cash in its balance sheet. I believe that the company will sell more shares if the stock continues its uptrend.

AMC shares also jumped sharply after the shareholders rejected a compensation package this week. In April, it was reported that Adam Aron, the CEO, earned $25.4 million in 2023 even as its stock crashed by more than 90% between its highest and lowest level during the year. The company also diluted its shareholders substantially in 2023. 

AMC’s fundamentals are still not strong as the movie theatre industry goes through a deep slowdown. However, as I wrote in May, the company’s results were not all that bad. Its revenue came in at $951 million, down from $954 million in the same period in 2023.

This revenue drop happened at a time when the industry is still dealing with last year’s Hollywood strikes. As such, I expected the revenue drop to be much deeper than that. The company also narrowed its net loss to $161 million from $235 million in the same quarter in 2023. 

Still, the management warned that the second quarter’s growth will be weak because of the strikes. I expect that its business will stage a strong comeback in the second half of the year because of the slated movie releases. Some of the movies to watch will be Despicable Me, Fly to the Moon, Deadpool & Wolverine, Borderlands, and Transformers.

The biggest risk for AMC investors is that the company will continue its dilution, which happens when a company sells new shares. AMC has raised billions of dollars through dilution in the past few years and this trend could continue.

AMC stock price forecast

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AMC chart by TradingView

Regular readers know that I have taken a contrarian stance about AMC Entertainment since 2023 as you can read here, and here. My argument was that the stock was moving into the accumulation phase of the Wyckoff Method. It was also forming a falling wedge pattern, which is one of the most popular bullish signs.

Now, the meme stock frenzy has seen the stock jump above the 50-day Exponential Moving Average (EMA), which is a positive thing. Therefore, I suspect that the ongoing short squeeze has more room to run as buyers target last month’s high of $11.80. 

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