AMC stock surge has come as a surprise to many Wall Street analysts especially due to headwinds caused by the global COVID-19 pandemic.

AMC Entertainment Holdings Inc (NYSE: AMC) stock experienced a surge on Thursday by over 47%, closing the day trading at $26.52 (with a 35.6% rise). Meanwhile, the AMC stock had added approximately 10% during Friday’s pre-market. The soaring stock was attributed to speculative trading by WallStreetBets Reddit forum enthusiasts, which according to stock analysts from the Bank of America, made AMC stock the most popular. This envious position was initially held by GameStop Corporation (NYSE: GME), AMC’s meme stock peer which early this year had experienced a record 400% short squeeze within a single week. However, on Thursday GameStop shares went up only 4.8%.

Additionally, S3 Partners’ financial analysis showed about 20% of AMC’s float shares have been sold short in comparison to the 5% typical average of US stock markets. However, the recent skyrocketing stock prices cost short sellers $1.3 billion in losses this week. Most of them had to buy back borrowed shares to prevent further losses, an action that fueled the rally further. Ihor Dusaniwsky of the S3 Partners said AMC’s short sellers had begun feeling exposed early this month which is why they backed away.

Further Notes on AMC Stock

AMC stock surge has come as a surprise to many Wall Street analysts especially due to headwinds caused by the global COVID-19 pandemic. The number of people attending movie theatres has reduced in addition to reduced theatre capacity and the number of days movies are played. Movie release dates from streaming services have also changed.

As well, AMC’s debts reach a staggering $5 billion in addition to $450 million of deferred lease payments. At the end of Q1, the company posted revenue of $148.3 million, which is an 84.2% drop in comparison to revenue a year ago. Losses however shrank to 567.2 million equal to $1.42 per share from $2.18 billion equal to $20.88 per share.

Despite these, AMC stock has risen by over 1,200% since January. Moreover, the company’s Q1 revenue hit $1 billion in liquid cash. This is a record high since its inception 100 years ago and is expected to keep it afloat through 2022.

New retail investors have flocked AMC following soaring stock, leading to a near triple valuation of the company. By the end of 2019, AMC was valued at $5.8 billion but by Wednesday, this value had risen to an estimated $13.4 billion. Nevertheless, the movie theatre chain will need improved functionality, including a number of customers and theatre days, to compensate for the months of low revenue.

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Steve Muchoki

A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies.
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