Is AMC Stock, 99% Below Its All-Time Peak, A Buy Or Sell Now? Here’s What Fundamentals, Chart Action, Fund Ownership Metrics Say

Going to the movies is fun and exciting again. But can it match the truly mind-bending action of AMC Entertainment (AMC)?




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AMC stock struggled in January this year. Unfortunately, February has yet to see the stock make a serious rebound.

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. The S&P 500 added 1.6% in January. In all of January, AMC shares rose in only four separate sessions.

On Wednesday, AMC stock dropped another 3.2% in below-average volume to 3.94.

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. 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.

A Terrible 2023 For AMC Stock

Shares slid 37% and 8% in November and December, respectively, vs. gains of 9.1% and 4.1% by SPDR S&P 500 ETF Trust (SPY).

Quarterly results also boost a stock’s volatility. And AMC stock has been no exception.

After the company reported third-quarter results on Nov. 8, shares dropped more than 25% for the week in accelerating turnover.

AMC Entertainment posted a third-quarter net loss of 9 cents per share amid a healthy 45% rise in sales to $1.41 billion. Both beat expectations. According to Yahoo Finance, analysts on consensus expected a net loss of 27 cents and $1.23 billion in sales.

AMC’s Q4 results are slated for Feb. 28.

Going beyond the fundamentals, growth investors benefit in a big way if they understand how well a stock performs vs. a key benchmark. As for AMC stock, IBD’s relative strength line, which graphs a stock or ETF’s day-to-day performance vs. the S&P 500, has plunged since Aug. 14. This means AMC has sharply underperformed the S&P 500, especially since mid-August.

AMC’s market value has plummeted to $782 million, according to MarketSmith. At one point on Feb. 28, 2023, the stock was valued at $14.9 billion.

AMC Stock Today: Is It A Buy Now?

The recent drop in price follows a 1-for-10 stock split in late August.

On Jan. 2, B. Riley Securities said it maintains a neutral rating on AMC stock but lowered its price target to 12 from 15, Benzinga reported.

So, is AMC stock a buy in 2024? Or is it 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.


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Color On The Q3 Results

The company reported net income of $12.3 million in the third quarter, a vast improvement from a net loss of $227 million a year earlier. AMC also said it achieved diluted earnings of 8 cents a share vs. a net loss of $2.20. Adjusted EBITDA jumped to $193.7 million from a negative $12.9 million a year ago.

Cash and cash equivalents stood at $730 million as of Sept. 30.

CEO and Chairman Adam Aron noted that the Q3 success “came at a time when our attendance at the domestic box office in the quarter was still 16% below comparable 2019 levels.” Aron cited the revenue contribution per patron jumped 30% vs. 2019 levels.

Aron also highlighted actions including closing marginally performing movie theaters, opening higher-revenue new cinemas, and a “continued focus to manage expenses in a challenging inflationary environment.”

Wall Street currently sees AMC posting a net loss of $1.55 a share this year (down from $3.02) and a net loss of $1.65 in 2024, down mildly from an earlier estimate of -$1.82. In 2022, AMC posted a full-year adjusted net loss of $6.95 a share vs. a net loss of $11 in 2021, according to MarketSmith data.

Taylor Swift Mania Moves To AMC Theaters

During premarket trading on Aug. 31, 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. The movie launched officially on Friday the 13th. Ticket prices range from $19.89 for adults plus tax, and $13.13 for children and seniors.

“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 have been robust.

On Jan. 7, 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.”

Meanwhile, the company began showing “Renaissance: A Film by Beyonce” globally on Dec. 1.


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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.

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 MarketSmith, AMC now has 198.4 million shares outstanding.

AMC Stock Today: 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 that the conversion brings.

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 newly updated data on a MarketSmith chart, the stock now holds a revised float of 196.4 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.

According to MarketSmith, short interest — shares sold short by individual and professional investors — has rebounded to 24.4 million shares, or 12% of the stock’s newly revised float of 196.4 million shares. In early October, the short interest ratio was at 14%.

Strong future profits 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.


Investor’s Corner: What Is Short Interest, And How To Take Advantage Of It


Key IBD Ratings

AMC’s ratings in IBD Stock Checkup are still showing extremely bearish tints.

They include an improved 70 Earnings Per Share Rating on a scale of 1 to 99, up sharply from 23 in recent months. Prior to the Q4 report, AMC’s EPS score stood at 42.

A 25 Composite Rating on a scale of 1 (wizened) to 99 (wizardly) has inched higher in recent days remains desperately low. 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.

AMC’s movies industry group shows an improved ranking lately, at No. 22 among IBD’s 197 industry groups in terms of six-month price-weighted performance. The group had risen to as high as 20th during the summer of last year.

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 MarketSmith data. These two ratings both now stand at 1 and 2, respectively. A 1 RS score is the worst possible.

The RS 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 has fallen to a negative D 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.

Meanwhile, mutual funds owning a piece of AMC stock have dropped from 686 at the end of 2021 to as low as 256 as of the end of the fourth quarter, according to MarketSmith.


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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. (MarketSmith has a change-date function that 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?

Amid the latest plunge, AMC sits 99% 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.

The stock needs to first bottom out. Once shares start picking up some serious gains, watch for a new bullish chart pattern will form. At this point, AMC will definitely 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.

So at this point, AMC stock is not a buy.

Shares need to do these four things now:

  1. Rise above the 10-week moving average — currently near 5.50 — and stay above it for a significant time. This failed to happen in the second half of 2023.
  2. Overcome a new overhead supply of disgruntled holders ready to sell if the stock climbs back to around 6 to 8 a share. The July near-term high of 54.97 had emerged as the left-side lip of a super-deep bottoming base. That price is extremely far away and no longer relevant now.
  3. Present price-and-volume action that signals heavy accumulation by fund managers, not distribution.
  4. Rebound above its still-falling 40-week moving average, which has now sunk to 21.

Last But Not Least

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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