AMC Entertainment stock has fallen below $5.50 now.
The last time the stock traded at these levels, retail investors had just begun to flood the market with the goal to squeeze shorts from their positions.
In 2021, novice investors managed to elevate the movie theatre’s share price from $2.50 to $22.00 before ultimately coming back down to today’s levels.
But retail investors wanted more.
The community grew and people with all sorts of backgrounds from all around the world began purchasing the stock.
The result months later was a massive surge to $72 per share.
Is AMC Entertainment stock a buy right now?
Let’s dive into it.
Join the newsletter to receive market news and updates straight to your email.
Can an AMC Short Squeeze Be Replicated?
AMC’s biggest price surge in 2021 happened due to a combination of retail investors and big institutions heavily buying the stock.
And because AMC had a lot of short activity, the few percentages of shorts that closed their positions further contributed to the ‘buy back’ volume in AMC.
The environment was just perfect though, AMC peaked during a bull market, which made it easier for ‘buying’ sentiment to be there.
Today, Fintel is reporting AMC’s short interest at 19.42%.
AMC’s short interest was 21% when it began to deflate and surge to its all-time high.
What will trigger an AMC short squeeze?
A big chunk (percentage) of short sellers all closing at the same time.
This happened in 2021 when AMC’s short interest dropped from 21% to 14% when price surged from $14 to $72 per share.
Heavy buying pressure from both retail and institutional investors is a start.
But the market conditions have to be right, sort of like they are today.
Shorting Conditions Will Cease
At some point the markets have to come up again.
This is law in the stock market.
And when they do, buying pressure will begin to take over, not just from retail investors, but from institutional buyers as well.
This is where we can expect market makers to go long on securities again.
How long until we enter this environment again is currently unknown primarily due to economic uncertainty.
The point is the market goes through these drawdowns and eventually resuscitates from the grave.
Is AMC Entertainment a Risky Investment?
AMC Entertainment has always been a risky investment, but the beauty about high risk is high reward.
Just ask those who capitalized from a starving movie theatre chain at $2.50 per share when it surged more than 3000%.
Today AMC Entertainment has improved its fundamentals drastically, despite its heavy debt burden.
The company CEO is an expert at raising cash which is how AMC has been able to stay afloat after the events of the ‘meme stock’ frenzy.
Analysts say AMC is burning more cash than it is currently generating, and the CEO has already sold majority of his stock, banking more than $40 million in the process.
Insiders sold their shares in 2021 when the stock was breaking all-time high records.
Replicating another massive surge will require the participation of millions of new retail investors.
Many holding their AMC shares aren’t buying anymore but rather remaining patient until market conditions change again.
Is AMC Entertainment Stock a Buy Today?
Value investors capitalizing on short-term gains during today’s market conditions may benefit from AMC’s micro surges.
If AMC Entertainment is unable to hold above previous major demand levels around $5.50-$6, squeezing short sellers could prove to be a much bigger challenge in today’s market.
We want to see green flags when buying AMC Entertainment stock, such as:
- CEO, insiders, and other institutions beginning to buy shares of the stock
- Increasing revenue and decreasing debt
- Market conditions shifting from bearish to bullish trends
While AMC Entertainment stock today is a steal, weakness in the market may suggest the stock has room for further decline.
But just as quickly, large short positions closing may send AMC’s price up without notice.
Leave Your Thoughts Below
AMC Entertainment stock continues to be a big curiosity among investors even as we enter the new year.
Where do you see AMC Entertainment in 2023?
Leave your thoughts in the comment section of the blog below.