Going to the movies is fun and exciting again. The opening-day results of “Dune: Part Two” released on March 1 certainly attest. But can it match the truly mind-bending action of AMC Entertainment (AMC)?
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Last month on May 13, AMC stock jumped 78% in a single session, then roared another 32% the next day and hit as high as 11.88. It hadn’t seen that price since August of last year.
The impetus? Fellow 2021 meme stock Gamestop (GME) soared on news that Roaring Kitty, who gained fame on the WallStreetBets message board of Reddit, announced that he was making a new big bet on the stock. Gamestop shares quickly moved in hyper-kinetic form, to say the least, as this new IBD story highlights.
Meanwhile, AMC stock continues on a rollercoaster ride. Yet it’s also risen nicely from its year-to-date low of 2.38. Back in May, shares rose as much as 399% from that low.
At one point on May 14, shares pole-vaulted above the long-term 200-day moving average, another sign of a possible character change. However, it soon fell below this long-term technical level.
AMC Stock Today
Shares sank sharply on news that the company plans to enter into a new equity agreement to lower its outstanding debt. AMC nearly fell back to 4, but has held above this price level in recent weeks.
And on June 24, the stock edged mildly higher on a Bloomberg report that the company is talking with some of its lenders to reduce its debt load and extend the maturity date of some bonds. While the company has not confirmed such a report, investors appear to have more optimism. Through Thursday trading, AMC is up 9% for the month of June.
So, is AMC stock a buy in 2024? Or is it still a sell?
This story examines fundamental, technical and fund ownership factors to determine if the Leawood, Kan., company with 900 theaters and 10,000 screens scores a good probability of making money for stock traders.
AMC stock struggled in January this year. On Jan. 31, after the Federal Reserve’s first meeting of 2024 on interest rates concluded, the stock finished 1.5% lower to a record low of 4.05 and dropped nearly 34% for the month. In contrast, the S&P 500 added 1.6% in January.
It was encouraging to see AMC shares bounce off its lows in February and end the month with a 6.7% gain. Yet for months, the stock had been living below an important technical level on its weekly chart: the 10-week moving average.
The sell-off then worsened in March, despite some optimistic comments from the company’s CEO.
“My good news on this Easter Sunday is that in March, the domestic industry box office finally turned upwards,” AMC CEO Adam Aron said in a recent tweet on X.
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April Showers For AMC Entertainment Stock Turn Into May Flowers
AMC stock finished the month of March down 13.9%, then nose-dived another 21% in April. But in May, shares briefly vaulted 305% and traded above 10.
Plus, the weekly chart shows a bullish new development: AMC surged above the 10-week moving average, which has begun to slope higher. That’s positive.
Yet since May 8, when the company reported Q1 results (net loss of 78 cents a share, much less than the $1.31 it lost a year earlier), shares have gained considerable ground. Sales fell slightly in the quarter vs. a year ago to $951.4 million.
Earlier in the second quarter of this year, AMC traded briefly below 3 after it reported an adjusted net loss of 78 cents a share amid revenue of $951.4 million, down less than 1% vs. a year earlier. CEO Adam Aron said in prepared remarks that “better times are ahead.” Capital IQ forecast a net loss of 77 cents.
“We had expected for some time the Hollywood actor and writer strikes of 2023 would impact the first-quarter box office, but were heartened by the strength of moviegoing in March, which reminded us that better times are ahead,” Aron added.
Following the rocket-like move in GME, AMC’s stock market value has rebounded back above $1.4 billion, according to MarketSurge, before sinking again. More than a year ago on Feb. 28, 2023, the stock was valued at $14.9 billion.
A Terrible 2023 For AMC Stock
Starting the year 2021 at 2 a share, AMC stock skyrocketed 36-fold to an all-time high of 72.62 on June 2 that same year. (Those prices are unadjusted for a 1-for-10 reverse stock split conducted in late August of 2023.)
Then came 2022, a brutal year for meme stocks.
AMC stock started that year at 27.20 (before the reverse split) and ended at 4.07, a miserable loss of 85%.
Move forward to the summer of 2023, particularly in July that year. AMC shareholders had good reason to look forward to another rebound. However, a key change in the capitalization of the stock led to a massive decline during August and September.
For long-term holders, the news helped lead to a disheartening finish in 2023 in which AMC stock plunged 83% to 6.12.
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AMC Stock Today: Q4 Results
On Feb. 28, the company posted a fourth-quarter net loss of 54 cents a share. While that’s a heavy loss, it’s a lot less than the net loss of $1.40 in the year-ago quarter. Sales grew 11% to $1.1 billion, marking the fourth quarter in a row of double-digit increases.
That Q4 year-over-year increase decelerated from full-year top line growth of 23%.
On the positive side, AMC said adjusted EBITDA (earnings before interest, tax, depreciation and amortization) soared 193% to $42.5 million. Non-GAAP operating burn was light at -$0.8 million. It held $884 million in cash and cash equivalents at the end of the quarter. That’s up from $730 million at the end of Q3.
On March 1, AMC also elected Sonia Jain to the board of directors. Jain currently serves as CFO of Cars.com. She held the same post at both Convoy Inc. from April 2022 to September 2022. Jain also worked at Redbox Automated Retail as chief financial officer from September 2016 to June 2020.
AMC Chair and CEO Adam Aron noted that both AMC’s full-year revenue and adjusted EBITDA hit the highest levels since 2019, the year right before the Covid pandemic. Aron added that the firm also notched positive adjusted EBITDA in each quarter of the full year for the first time since pre-pandemic 2019.
Meanwhile, the sequel to 2021’s “Dune: Part One” action drama and sci-fi epic pocketed $32.2 million in ticket sales through the Friday night leading into its opening weekend, according to data compiled by box-office tracker Comscore, Barron’s reported on March 3.
For now, analysts on consensus see the company posting a net loss of $1.21 a share this year and 47 cents in 2025. Those estimates were worse in the past. AMC posted a full-year adjusted net loss of $6.95 a share in 2022 and lost $1.59 in 2023.
Taylor Swift Mania Moves To AMC Theaters
During premarket trading on Aug. 31, 2023, AMC stock rose more than 6% after the company announced it would begin showing “Taylor Swift: Eras Tour” four times each day from Thursday through Sunday at all of its locations.
“In anticipation of the first day of advance ticket demands, AMC has bolstered its ticket server capacity to handle traffic at more than 5 times the current record for the most ever tickets sold in an hour,” AMC said in a news release. On Sept. 1, the company reported that pop music icon Taylor Swift’s concert film shattered records for single-day ticket sales revenue at $26 million.
Indeed, ticket sales proved robust.
On Jan. 7 this year, AMC announced that the Eras Tour movie officially became the highest grossing film in box office history in the concert and documentary film category, achieving $262 million in ticket sales to date. That broke the $261.2 million record of the 2009 concert film “Michael Jackson’s This Is It.”
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Share Offering News Crushes AMC Stock
However, even after news of the Taylor Swift movie, AMC stock still cratered more than 71% in August. It marks the worst drop in a single month for AMC stock, deeper than even the 49.5% drubbing it took during the month ended March 2020 and a 49.9% plunge in October the same year.
Keep in mind that blockbuster movies or TV shows don’t necessarily lead to an equally sizable windfall for the theater operators.
Robert Marich, author of “Marketing to Moviegoers,” told IBD that “profit excess from ticket sales of blockbuster movies goes disproportionately to Hollywood distributors, because theater percentage of ticket revenue diminishes on a percentage basis.”
AMC shares plunged another 36% in September last year to 7.99. The 33% gain in October was pleasant to see, but AMC stock gave back all of that rebound in November.
Over a two-day period on Sept. 6-7, the stock fell a combined 43% after the company announced a plan via a filing to the Securities & Exchange Commission to sell up to 40 million in additional common shares.
Volume skyrocketed to 84.9 million shares during the Sept. 6 sell-off — a clear sign that institutions unloaded shares. Turnover jumped to the highest amount so far this year and almost eight times the stock’s average turnover over the past 50 sessions.
Ahead of the offering, the company showed 158.4 million shares outstanding. A new share offering can dilute the stock; according to MarketSurge, AMC now has 295.6 million shares outstanding.
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AMC Stock ‘APEs’ Conversion Whacks Shares
On Aug. 14, the stock cratered more than 35% to 29.91 on news the Delaware Chancery Court approved the company’s revised plan to convert its preferred equity units, nicknamed “APEs.” AMC CEO Adam Aron described it as a “terrific relief,” MarketWatch reported. But shares likely plunged on the dilution effect from the share conversion.
The company on Aug. 18 issued a new 8-K filing to the SEC with details on the conversion of the APEs. The conversion resulted in the trading of a single class of AMC shares and the completed 1-for-10 reverse split of common shares.
On Aug. 24, trading in AMC stock reflected the 1-for-10 reverse stock split. That is, a holder of 10 shares of AMC now owns just one share, but the share price got multiplied by 10. The action, for now, has not stopped recent bleeding in shares.
According to updated data on a MarketSurge chart, the stock now holds a revised float of 292.6 million freely traded shares.
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Will The Shorts Cover AMC Stock This Year?
Even though an epic short squeeze rally hit overdrive in January 2021, AMC stock still attracted short sellers during the summer of that year. Now, after a bruising decline since the spring of 2021, have the shorts let up?
Let’s first revisit the hyper-fast run during the meme stock boom of 2021. Prior to the giant gain on June 2, 2021, over just five sessions of trade (May 24 to 28), AMC obliterated the short sellers by rising as much as 203%. In the week ended June 4, AMC stock almost finished up 100% or more for a second straight week. Incredible.
In January 2021, WallStreetBets chat-room traders on Reddit joined in unison in buying shares and bullish call options in AMC stock. They did the same in a band of other companies that had been heavily sold short and struggling.
How about today? According to MarketSurge, short interest — shares sold short by individual and professional investors — has fallen a bit to 56 million shares. That’s still 19% of the stock’s float of 260.6 million shares.
Strong future profits or improving cash flow could lead to increasing accumulation by large funds and other institutional investors. A powerful rebound could force short sellers to cover their positions, helping to propel shares even higher.
When a stock shows a high level of short interest and is getting bid up, you can almost count on a chain reaction of buying to occur. Why? Short sellers, betting on a decline in the stock, at some point may have to do a sudden about-face. They cover their short position by buying back shares.
The NYSE publishes data on short sale positions twice a month. Plus, the short coverage ratio can be skewed by dramatic changes in daily share turnover. The above data also does not consider any shares that may have been sold short in dark pools.
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Key IBD Ratings
AMC’s ratings in IBD Stock Checkup are still showing extremely bearish tints.
They include a 52 Earnings Per Share Rating on a scale of 1 to 99, up from 23 in recent months but down from 70 prior to Q4 results.
A 34 Composite Rating on a scale of 1 (wizened) to 99 (wizardly) has gained several points yet remains weak. Back in February of 2023, it stood at 76.
When choosing growth stocks for the biggest potential gains based on the key elements of IBD’s growth stock investing paradigm, focus on those with a Composite Rating of 90 or higher. Shooting for a 95 or higher, particularly at the start of a new bull market, is even better.
Meanwhile, AMC’s movies industry group had shot up to as high as 8th among 197 IBD industry groups in terms of six-month price-weighted performance. At 13th, the ranking remains robust.
Check the daily price-weighted performance of all IBD industry groups, plus rankings based on six-month performance, at IBD Data Tables.
AMC Stock: Relative Strength Sinking Again
In August last year, AMC held a very respectable 96 Relative Strength Rating. This score means AMC stock had outperformed 96% of all stocks in the IBD database over the past 12 months. And the 3-month RS Rating at the time zoomed to a highest possible 99, according to MarketSurge data. These two ratings both now stand at 12 and 96, respectively.
The Relative Strength Rating runs from 1 to 99; for investors selecting top growth stocks, the higher the RS Rating, the better the stock in general.
Watch to see how the RS Rating changes in the coming week.
The Accumulation/Distribution Rating shows a solid A- grade on a scale of A to E. This rating analyzes 13 weeks’ worth of price-and-volume action. A grade of C+ or higher points to institutions, on net, accumulating shares. This rating should get a prompt boost.
Meanwhile, mutual funds owning a piece of AMC stock have dropped from 686 at the end of 2021 to as low as 208 as of the end of the first quarter, according to MarketSurge.
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Stock Action In 2021 Vs. 2022
Back in May 2021, this story suggested watching how AMC stock handles potential upside resistance near 20. In fact, the action since that incredible week ended Jan. 29 molded a deep cup pattern. From that vantage point, AMC delivered a second breakout on May 27, surpassing a new 20.36 buy point with fury. (MarketSurge’s change-date function makes it easy to look at historical charts.)
To get this ideal entry in a cup without handle, simply take the cup’s left-side high. On May 27, shares rifled past the 20.36 entry. For a while, AMC refused to look back. Still, with gains of as much as 501% in just two weeks, it made sense to lock in at least partial profits.
For a few days in August 2022, AMC tried to cross a nearly 12-month trendline that connects the September 2021 peak (32.43, adjusted for a stock split) with lower highs in November 2021 (28.23) and early April 2022 (21.09). For the very aggressive trader, this trendline breakout near 15 offered an uber-speculative entry. But the rally attempt fizzled fast.
As always, control your risk. Not all breakouts work, especially when the stock market uptrend goes under pressure or into a correction. The best time to buy? When IBD notes the market in a confirmed uptrend, it signifies that buying demand is healthy among institutional investors.
In stock investing, seek the wind at your back, not in your face.
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AMC Stock In The New Year: Is It A Buy Now? Or A Sell?
AMC still sits 98% below its split-adjusted high of 393.65 set on June 2, 2021. So at the current price level, it does not yet trade at an IBD-style entry point.
However, the stock is showing signs of bottoming out. In fact, a very deep cup base formed. The left-side peak of the two-month cup, or 5.10, briefly produced a viable entry this week. The stock blasted past this entry but price activity remains violent.
One could draw a trendline from the Feb. 28 peak of 5.10; the weekly chart generated an aggressive entry at 3.44.
It’s highly preferable to buy a stock no more than 5% past any buy point. In this situation, the 5% buy zone goes from 3.44 up to 3.61 from the aggressive trendline entry.
So at this point, AMC is not a buy since it’s moved out that 5% buy zone. However, further sideways movement could generate a new base and a potential new entry.
Three weeks ago, AMC stock struggled to rise past 6; perhaps that price level could become a breakout point.
Final Chart Analysis
In the meantime, keep watching for a new bullish chart pattern will form. AMC, just like any other stock, may still need weeks, if not months, to build a proper new base in bullish fashion.
An excellent set-up means the big boys and girls on Wall Street are more inclined to buy and hold shares, not dump them. Once a strong chart pattern has been established, an IBD-targeting breakout offers traders the best opportunity to reap gains at the start of a potential big run.
Finally, after you buy any stock with solid prospects, always heed the golden rule of investing. Keeping losses small keeps you in the investing game for the long haul.
Please follow Chung on Twitter: @saitochung and @IBD_DChung
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