Today, meme stocks such as AMC Entertainment (NYSE:AMC) are surging. Shares of AMC stock flew more than 10% in earlier trading on heavy volume. Today’s move comes amid a surge in retail investor interest for short squeeze plays.
In this regard, AMC has been one of the first — and biggest — winners. Retail investors buying into the short squeeze thesis with this stock have been rewarded by holding through the volatility this year. Indeed, it’s hard to fathom how far AMC stock has come. Shares of AMC stock were trading around $2 per share to start the year. Thus, today’s move of more than $3 per share in AMC stock represents a 150% increase over this stock’s opening price this year.
The investment thesis with AMC stock appears to be directly tied to its high short interest. Indeed, AMC’s short interest remains much higher than the broader market. Currently, approximately 18% of AMC’s float is sold short. This is high, along with the associated borrow fee rate with this stock. Accordingly, retail investors are banking on hedge funds and other large institutional investors getting caught holding large short positions in this stock, should it increase rapidly, as it has earlier this year.
All that said, let’s take a look at one of the key reasons why AMC stock is on the move today.
Theater-Exclusive Releases Boosting AMC Stock
For investors in AMC stock, one of the biggest threats in recent months has been the rise of streaming platforms. Direct-to-streaming releases bypassing the traditional theater-exclusive model has provided a way for Hollywood production companies to stay afloat during the pandemic. However, a mass shift toward such a model could potentially put AMC stock, and its peers, in jeopardy.
However, today, investors seem to like some strong results from recent theater-exclusive releases. Among the releases that saw strong debuts were Candyman and Shang-Chia and the Legend of the Ten Rings. These releases brought in total receipts that exceeded bullish estimates. Additionally, these releases are still only in theaters and haven’t been approved for streaming services yet.
Accordingly, investors are pricing in the continued longevity of the theatrical release model. For juggernauts like AMC, seeing that this business model still makes financial sense for movie production companies is a big win. Indeed, it appears investors have reason to celebrate today. Folks are going out and seeing movies. That’s great news for the industry, and for AMC investors, today.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.