As you can tell from our recent coverage of AMC Entertainment (NYSE:AMC), we’re clearly not big fans of AMC stock. Let’s be clear, it’s nothing personal. We fully get why some investors remain willing to roll the dice on this one time “meme king.”
After all, given how something like the re-emergence of famed meme stock trader Keith “Roaring Kitty” Gill can be enough to drive a rally, it makes sense why some may want to enter short-term speculative trades in this stock.
Others may see AMC as a turnaround play that, while risky, has the potential for tremendous gains if a comeback pans out. However, while there may be two popular reasons to buy and hold AMC right now, make no mistake.
These are not supportable reasons to maintain a position. As we’ll explain below, the chances of shares avoiding a further downward spiral are now next-to-none.
AMC Stock Prediction: Another Meme Wave Isn’t Likely
Yes, back in May, few anticipated that “Roaring Kitty” would return to the public eye, driving another major wave of “meme mania.” This second act for Keith Gill proved profitable for the trader, yet don’t assume that a third one is just over the horizon.
After his recent dabbling in two widely-followed meme stocks, which fueled a massive cycling back into other meme plays, AMC stock included, Gill’s social media postings have again screeched to a halt.
The fact that securities regulators are scrutinizing Gill’s latest trades may have something to do with his lower profile. Gill may also perhaps know full well that the impact of his antics is likely to diminish if overdone.
He could pull off what he pulled off this summer sometime down the road, but at this point it’s doubtful that a “Roaring Kitty” encore will arrive in the immediate future.
This may not necessarily mean that AMC is doomed to tumble in the coming weeks. That said, it does suggest that there’s little reason for those trading on market psychology to dabble in this stock right now.
A Fundamentals-Based Bet is an Even Worse Wager
A technical or market psychology-based approach with AMC stock isn’t likely to work, but making a fundamentals-based bet on shares may be an even worse wager. It all has to do with the potential risk/reward over a time frame measured in months and years, as opposed to days and weeks.
The jury’s still out whether improved results are just around the corner for AMC Entertainment.
As we have pointed out recently, there’s more to it than just strong box office results. Besides a further rebound in ticket sales, the company needs to resolve its massive debt problem. Only then will AMC become consistently-profitable.
The issue, however, is that it will undoubtedly entail heavy amounts of shareholder dilution. Not that AMC investors haven’t already been diluted heavily over the past few years. Since the start of the “meme era,” AMC’s share count has grown nearly sixfold, from 51 million to 295.6 million shares outstanding.
According to Seeking Alpha commentator Elephant Analytics, AMC may need to issue or sell as many as 380 million additional shares, to bring debt down to manageable levels. This could save the company, yet water down the share price to new all-time lows.
Sell Before the Spiral Resumes
Gill’s antics, plus some recent hype surrounding domestic box office figures, have led to a pause in the AMC downward spiral. However, considering our arguments above, it may not be long before shares are again trending to lower and lower prices.
Whether you are a meme trader, or a more fundamentals-based investor, clear out of the theater, the show’s over. Those favoring short-term trades may find better opportunities capitalizing on other current investing trends.
If you’re a long-term investor bullish on the out of favor movie theater industry, you don’t have to look far to find potentially better alternatives for making this wager.
Irrespective of one’s investing approach, the important takeaway here is that AMC stock today is a losing proposition. While it’s perfectly fine to keep an eye on the situation, by no means make it a buy.
AMC stock earns a D rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.