See Why AMC Stock Has a Good Chance of Rebounding in 2021

After benefiting from Reddit’s meme-stock short-squeeze euphoria in Janury 2021, AMC Entertainment (NYSE:AMC) is stuck in a range. Just as AMC stock traded in a range last year as markets waited for the movie theaters to reopen, it is cycling for the same reason this year.

AMC stock lacks the Reddit short-squeeze catalyst. The short float is an eye-opening 21%. Chances are high that bears will profit from the stock falling in the months ahead. Not only is management unfriendly to investors, but movie theater attendance will trickle higher at best.

AMC Stock at Risk of Dilution

Before the pandemic, AMC’s management would sell shares or issue debt to increase its cash on hand. When movie attendance fell off a cliff, the company did this again. The persistent stock sales will dilute loyal shareholders further. Still, the alternative is worse. AMC could file for bankruptcy, which would hurt both debtholders and shareholders.

The risks of a stock sale will forever prevent Reddit’s r/WallStreetBets group from trying to short-squeeze bears. So, shareholders need to examine AMC’s latest first-quarter earnings report for clues that the business is stabilizing. In Q1, AMC reported a staggering loss of $1.42 a share (non-GAAP and GAAP). Furthermore, revenue fell by 84.2% to $148.3 million. Considering the Covid-19 pandemic shut theaters down, AMC did not have enough blockbusters to lift reopening movie attendance. Here is how to trade this stock right now

AMC’s Chief Executive Officer and President, Adam Aron, noted that a successful and steady vaccination program will create a favorable environment for the industry. The theater chain has “AMC Safe & Clean” protocols already in place. Long-awaited movie titles will attract loyal moviegoers back to the theater.


The movie theater reopening is AMC Entertainment’s only catalyst ahead. And it is a big one. Currently, the 25% to 50% capacity restriction is putting a cap on the maximum revenue potential for the company. Before it reaches those levels, customers need to come back in increasing numbers.

Once vaccination rates approach levels that support herd immunity, customers will not hesitate to go to the movies. The movie experience easily beats the home-theater setup. Streaming movies are at prices comparable to going to the theater, depending on the viewer count. But families will choose to spend more for the big movie screen, the popcorn and the live audience.

CEO Aron said on the conference call that AMC will hire between 5,000 and 10,000 staff. As it approaches the busy summer season, it will have the staff to support stronger movie attendance. This aligns with the timing of new movie releases.

Fair Value

Wall Street analysts are bearish on AMC’s prospects. Recent price targets vary wildly, ranging from $1 at the low end to $13. The upcoming Memorial Day weekend will kickstart the movie theater rebound. It signifies the first time in more than a year that moviegoers come back to the theater. That will jumpstart the needed momentum for them to come back in July and August.

Movie studios that kept blockbusters on the shelf will release them this summer. Therefore, they will capitalize on the audience growth momentum. In the markets, investors who bet heavily on streaming video services stocks will pivot to AMC Entertainment. Cinemark Holdings (NYSE:CNK) and Cineplex will also benefit from the renewed interest in the movie theater experience.

Your Takeaway

AMC’s survival depends on the movie theater coming back to life. Judging from the vaccine curtailing infection rates, AMC has a good chance of growing audience numbers.

Confectionary sales will grow steadily, too. Before the pandemic, the firm benefited from strong margins. There is no guarantee this happens again. Still, food and drink sales at theaters come with the sector’s recovery. Only when capacity is nearing 60% to 70% might the company raise confectionary prices slightly.

It is not yet there. But it can get there as the rebound plays out this year.

As cash flow turns positive, management may not need to sell more shares. Before that happens, investors could take a gamble by buying this stock on any weakness.

On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris Lau is a contributing author for and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.

All Credit:

Back to top button