- AMC Entertainment’s (AMC) brief spike in late March may have been its last “to the moon” move.
- Don’t expect its upcoming earnings report to inspire another meme wave.
- As it’s likely to resume its slide down to a price more in line with its underlying value, avoid buying AMC stock.
After giving back its late March gains, you may think now is a great time to grab shares in AMC Entertainment (NYSE:AMC). With a possible market rebound due to the Federal Reserve’s (Fed’s) latest rate hike plus the company’s upcoming earnings report, you may think there’s enough in play to send AMC stock “to the moon” once again.
Unfortunately, what played out in March was arguably the last hurrah for this meme stock legend. Instead of making another big run higher, shares in the movie theater chain may only see a modest boost from any May relief rally. There’s more pointing to a disappointing earnings report rather than one where it pleasantly surprises even its skeptics.
What’s the takeaway? With little on the horizon to spark another meme wave, there’s no reason to buy AMC stock. Shares are likely to continue making a steady slide down to a price more in line with fair value.
| AMC | AMC Entertainment Holdings, Inc. | $14.64 |
Few Catalysts Right Now for AMC Stock
You may think that there are two catalysts that could help lift AMC Entertainment shares in the short-term: a May relief rally and the upcoming earnings report. As you may recall, it was the market relief rally following the Fed’s initial rate hike in March that kicked off a short-lived spike for not just this meme stock, but other popular meme stocks, like GameStop (NYSE:GME), as well.
Yet, it’s questionable whether we’ll see this play out again this month. The May post-hike rally may be more short-lived than the March one. Two months back, the rise in interest rates occurred after that month’s Consumer Price Index (CPI) print. This one is happening ahead of the latest CPI print.
If the number shows that inflation has not yet peaked, a May relief rally could quickly morph into a sell-off similar to that seen in April. Even if this doesn’t happen and a rally carries on, it may not give AMC stock that big of a boost.
Why? Unless the company has another bit of meme-worthy news, like the Hycroft Mining (NASDAQ:HYMC) deal, which extended the March rally, shares may only see a modest rise in price at best.
Upcoming Earnings Report
AMC’s upcoming earnings report may seem like something that will get the self-described “Apes” to go bananas about AMC stock again. Taking a closer look, though, there is a lot to suggest it won’t drive too much excitement.
It is already assumed the company’s results will be leaps and bounds ahead of the prior year’s quarter. A year ago, the pandemic was still depressing movie theater attendance. Today, the attempted recovery for movie theaters is in full swing. A revenue beat, or the reporting of lower-than-expected losses, could possibly result in a post-earnings rally.
However, as a Motley Fool commentator recently argued, box office figures in February and March were uninspiring. This signals a revenue beat isn’t in the cards. As for lower-than-expected losses, sell-side analysts have already walked-back their estimates. A month ago, they were expecting 47 cents per share in losses. Now, they expect 63 cents per share in losses.
Updates to guidance could also spark a rally, but that is far from guaranteed. Box office receipts aren’t anticipated to re-hit post-pandemic levels this year. AMC may have limited ability to report revenue for the full-year 2022 that comes in well ahead of the current forecast of $4.57 billion.
No Reason to Buy at Today’s Prices
With little in play to get the meme crowd excited again, what’s next for shares in AMC? I don’t expect the stock to make a quick trip to a price in line with its fair value, which is under $10 per share.
I do, however, anticipate it to keep on making a steady slide to lower prices. The “Ape Army” will continue to drop in size due to attrition. Slowly but surely, it’ll eventually make its way to a price where it’s valued mainly on its fundamentals.
Weighing slim chances for a meme spike against the high chance it slides to lower prices, it’s best to avoid AMC stock.
On the date of publication, Thomas Niel 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.
