It is 2021 all over again. Meme stocks are back, baby! AMC Entertainment (NYSE:AMC) stock is soaring and though down from the peak during the recent frenzy, it stands 66% above where it was before the buying fever kicked in.
Investors should use this opportunity to sell their AMC stock. Take whatever profits were made and put them into a better investment. Lightning is not going to strike twice.
A Rally About Nothing
The current rally in the movie theater operator’s stock was not based on its business. While none of the trading in its shares over the last three years has been based on fundamentals, the current surge may be even less tenuous than at any time during the meme stock craze.
The return of Keith Gill sparked the most recent rally. He is best known as the internet trader who launched the meme stock era under the pseudonym “Roaring Kitty” on the WallStreetBets subreddit of Reddit (NYSE:RDDT). Two weeks ago, Gill made his first post on X (formerly Twitter) since 2021 that showed a video game player leaning forward. That’s it. That’s all that meme stock traders needed to send AMC stock soaring.
There was no commentary associated with the post, though most observers felt that if anything he was bullish about GameStop‘s (NYSE:GME) stock. The video game retailer’s shares soared even higher than AMC’s stock, rising 180% before cratering again.
Considering that AMC is now trading well above GameStop post-rally, you understand why the theater operator’s stock is still not tethered to reality.
Movies Theaters Are In Decline
It was true before the pandemic when theaters were unnecessarily shut down and before the stock trading frenzy when investors just bid shares up willy-nilly. It remains even more true today. The movie theater industry is in decline.
According to industry site The Numbers, theater attendance peaked in 2012 when some 1.37 billion movie tickets were sold. By 2019, the amount fell to 1.22 billion and never recovered. Just 830 million tickets were sold last year. The box office take topped out even earlier.
In 2002, nearly $17 billion was taken in on an inflation-adjusted basis. The year before the pandemic brought in just $13.2 billion. And it’s important to note that ticket prices are much higher today than they were back then. In 2019, the average price of a movie ticket was $9.16. In 2012 they cost $7.96, and 10 years earlier you could go to the cinema for just $5.81 a stub.
Although today’s movie tickets cost $10.78 each or 85% more than 22 years ago, the total box office last year at just below $9 billion, 32% less than the pre-pandemic haul. It shows that people just aren’t as interested in sitting in a movie theater as they once were. And the theater industry’s secular decline has not hit bottom yet.
Get Out While You Can
Investors in AMC Entertainment stock should sell. Particularly for those who got into the stock during the current wave of meme stock trading, there is little hope of the theater operator ever regaining its former glory.
Before the pandemic and the absurd stock trading frenzy, AMC stock was on a long, steady slide. From its 2015 high point to the end of 2019, the movie theater chain’s stock lost 80% of its value. It was a losing investment then and remains so today.
No doubt most people owning AMC stock are not buy-and-hold investors. They are traders trying to time the point when to jump in and out of the stock. Now that it’s down again after its most recent bump higher, they should view the 66% gain from its most recent levels as the perfect jump-off point to sell.
On the date of publication, Rich Duprey did not hold (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.
