The Negative AMC Stock Analysis That’s Firing Up Bulls Today

  • Shares of AMC Entertainment (AMC) have surged more than 5% this afternoon.
  • This surge comes as various reports suggest AMC's short interest is near one-year highs.
  • Retail investors may be betting on another short squeeze brewing.
AMC stock - The Negative AMC Stock Analysis That’s Firing Up Bulls Today

Undoubtedly, one of the most exciting stocks to have followed over the past year is AMC Entertainment (NYSE:AMC). This movie theater chain has seen its share price spike violently, in both directions, as a key short squeeze target of retail investors. Today’s price action with AMC stock is to the upside, with bulls seeing a 5% move higher in early afternoon trading.

This move comes as reports suggest short seller interest in AMC stock has hit their highest levels in a year. Currently, approximately 22% of AMC’s float is sold short. For those who may not know what this number means, it’s high. Any time double-digit short interest is seen in a stock, it’s probability of squeezing increases, and its cost to borrow (for short sellers) also rises.

Now, some might suggest that higher short interest may mean that Wall Street believes Main Street is throwing in the towel on this trade. Let’s take a look at why this stock is rallying today, on the back of these otherwise bearish numbers.

Higher Short Interest Is Positive for AMC Stock?

For many investors in AMC stock, the fundamentals clearly don’t matter. Sure, this is a pandemic reopening play. Various blockbuster hits recently have also sweetened the opportunity with this company.

However, it’s clear that AMC’s debt load, and its future obligations related to lease deferrals that will need to be paid over time, provide a massive headwind. This is a company that, even operating at capacity and with higher margins on its food and beverage sales, probably won’t be profitable for years.

Rather than fundamentals, many retail investors have piled into AMC stock as a potential short squeeze. In 2021, a number of squeezes played out, much to the cheer of main street. These squeezes eventually led to significant fallout from various hedge funds that have shorted AMC previously.

Accordingly, today’s report that short interest has climbed to its highest level in a year is likely to continue to stoke interest in the short-squeeze potential of AMC. Will this stock squeeze again? Possibly. However, I’m going to happily watch the volatility from the sidelines. AMC is simply too risky for my portfolio.

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 Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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