AMC Stock Is Undervalued Considering These Three Catalysts


  • AMC (NYSE:AMC) stock will rise above its meme status.
  • Hot movie title releases are the biggest catalyst for AMC.
  • A strong company statement on synthetic shares and streaming falloff will benefit AMC.
AMC stock - AMC Stock Is Undervalued Considering These Three Catalysts

AMC Entertainment Holdings (NYSE:AMC) stock has had a long and interesting ride.

During the frothy days, Reddit’s sub-group, r/WallStreetBets, stoked investor buying with entertaining memes. These days, the group’s creative memes are drying up. This will not matter for AMC.

For whatever reason, the mantra to hold GameStop (NYSE:GME) because it “won’t stop” helps AMC stock.

At a market capitalization of $6.66 billion, bears continue to bet against the meme traders. The short float is 21.31% for a very good reason.

AMC’s theatre business has incredible demand challenges ahead. Despite the risks, the stock rallied at least twice in the last two months on a strong movie release. This is one of three potential catalysts.

AMC AMC Entertainment $12.47

Catalyst #1: Box-office Hits

Paramount’s (NASDAQ:PARA) Top Gun sequel is a positive catalyst for attracting customers back to AMC theatres.

On the opening weekend, the film earned $124 million in revenue from 62 markets. In the second weekend, the movie attracted $90 million. This is the smallest decline ever for a movie that opened domestically to $100 million or more.

Paramount’s success with Top Gun: Maverick will mark the start of a turnaround in AMC. Studios are writing good movies and created strong demand ahead of the release.

On June 12, 2022, Jurassic World Domination grossed $145 million from 4,676 theatres. Comcast’s (NASDAQ:CMCSA) Universal division needed its hit title to win its shareholders.

CMCSA stock is on a downward trajectory. Shareholders are worried that advertising revenue will fall as the world enters a recession.

Jurassic World did not earn good reviews. Still, moviegoers ignored the negative commentary. Growing movie attendance for this mediocre dinosaur movie suggests revenue growth for AMC in the coming quarters.

Catalyst #2: No Synthetic Shares

Redditors turned against Chief Executive Officer Adom Aron. CEO Aron said that the company is aware of its roughly 500 million shares.

There is “no reliable info on so-called synthetic or fake shares.” The clarification is a healthy reaction to the fading meme-trading euphoria.

The more realistic AMC investors become, the more likely AMC will start trading based on its fundamentals. The stock should never have traded above a $70 peak.

It rose that high because uninformed investors bet the buying momentum would never end. Early buyers who recognize the temporary buying interest would fade earned a profit.

Anyone who bought AMC stock at the peak will not likely get their money back. Those holders started believing in a conspiracy that a shadow syndicate of Wall Street participants created fake shares of AMC. That way, they could control the stock from behind the scenes.

The end of unhealthy speculation around AMC will benefit long-term investors. The theatre chain has lots of work ahead to grow attendance. It needs to win back customers accustomed to watching movies through streaming services.

Catalyst #3: Streaming Demand Slows

Paramount and Comcast fell drastically in the last few weeks. Markets anticipate their high debt levels will cost more to service. Interest rates keep rising, adding to their interest costs. Studios will need to cut production spending. The audience growth in streaming is losing momentum.

People are taking advantage of the re-opening. Should countries re-impose a lockdown, people are spending more time outdoors. They will go out more often. Their activities will include going to the movie theatre with friends. This trend is good news for AMC Entertainment.

To diversify from AMC, investors could buy Cinemark Holdings (NYSE:CNK). The theatre chain trades at a forward price-to-earnings ratio of below 12 times.

AMC Stock Is a Buy

AMC shares risk re-testing a $10 low in the coming weeks. Once it bounces from those levels, movie investors could consider buying AMC stock.

On the date of publication, Chris Lau 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 Publishing Guidelines.

Chris Lau is a contributing author for and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get actionable insight to achieve strong investment returns.

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