AMC Entertainment Holdings Inc (AMC) stock may have soared but you shouldn’t chase it

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GMVD Stock

Reddit traders are back with their sights set on highly-shorted stocks. AMC Entertainment ‎ (AMC) which was shorted as well has seen a spike in its share on Wednesday due to Robinhood’s second wave of pumping the short-squeeze trades. In the past week, the AMC stocks were up by 6.2%.

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How big is AMC?

AMC Entertainment (NYSE:AMC) is the biggest theatre exhibition company in USA and consists of almost 1000 theatres across the world. In USA, specifically New York City, it is the largest theatre exhibitor with 13 theatres in the City.

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What is happening right now?

AMC stock has seen a gain since the past 4 consecutive days with a 22% volatile overnight spike, suggesting that the reddit-based group called WallStreetBets are playing a big hand in this trade. Furthermore, this consecutive streak of gain is also propelled by the significant news by New York City’s Governor; Cuomo announced that the city will open all the theatres and exhibitions from 5th March. This was one of the main reasons behind the 36% rally in stock on the first two days of the week.

Reddit, WallStreetBet and Robinhood at it again

Reddit-retail investors have revamped the GameStop stocks and other short-squeezed stocks including AMC entertainment after taking losses for weeks from the GameStop plunge. This plunge was caused because of the restrictions placed by brokerages, primarily Robinhood, on their client’s further investment in the heavily shorted stocks including GameStop. Robinhood will now think twice before placing restrictions in this second-wave of investments by reddit-retailers due to fear of backlash.

Business has been bad for AMC

Many of the entertainment industries including AMC entertainment have been licking their losses since the start of the COVID-19 that followed along with impositions of restrictions and in some case, complete shutdown of entertainment businesses. AMC entertainment surmounted a loss of $905.8 million and earnings shown in the Q3 reporting a 91% reduction to $119.5 million. Exhibition theatre industries are rivaled by the likes of new modern digitized entertainment industries like Netflix and HBO Max streaming. Not only are these newindustries hurting the market-capitalization of the theatre industries but these industries have banked-in on the COVID-19 restrictions and home-isolation based environments that lead to highest demand of premium streaming and VOD service entertainments at home.

Debt problem

Another issue that doesn’t help with the outlook of AMC entertainment’s profits and earnings is that AMC is surmounting a lot of debt problem. COVID-19 really did beat the can down the road for t AMC stock and furthermore, since 2020, it has been on the brink of bankruptcy on several occasions. While AMC has survived through all these financial bottlenecks but it is still very far away from a solid plan of operation that can give any sure shot of positive outlook for its market shares and valuation any time soon.

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Future prospects for AMC are shaky

AMC stock seems more of a volatile stock than a value stock which is why long-term investors who value quality stock will certainly keep themselves away from the WallStreetBet and the Robinhood fiasco. The prospects of AMC Entertainment look shaky. There are doubts about AMC Entertainment’s profitability outlook which can be a cause of concern for its market value in future. The start of AMC entertainment’s journey into 2021 started at $2 in the beginning of January and rose up to $20 towards the months’ end. The stock has doubled since the year’s beginning which may give a glimmer of positive news and hopes for future but it is highly risky to invest and hedge bets without a solid outlook.


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