AMC Entertainment (NYSE:AMC) stock surged with other top meme stocks following Keith “Roaring Kitty” Gill’s much-hyped return to social media. The famed meme trader’s activities (now under scrutiny) led to another short-lived wave of meme stock madness.
Unfortunately, this speculative frenzy has ended. AMC holders have a lot to lose. The stock may now be trading below pre-meme stock phenomenon prices. Still, AMC Entertainment isn’t a bargain. The stock’s underlying value is well below current prices.
AMC Stock Should Have You on the Edge of Your Seat
AMC may hold steady at around $5 per share, but chances are the stock isn’t going to hang tight for long. Yes, there is a possibility that another meme wave emerges. After all, following his latest buy, “Roaring Kitty” may have another trick up his sleeve.
However, if meme mania returns for an encore, it may only have, at best, a moderately high impact on the short-term performance of AMC stock.
As we’ve pointed out before, the whole “Roaring Kitty” situation only directly involves one meme stock, GameStop (NYSE:GME). AMC and other meme plays have only partially come along for the ride.
Moreover, there’s a good chance that, given the aforementioned scrutiny, and how poorly the latest “Roaring Kitty” social media event went, further stunts may have little impact on GME, much less other meme stocks.
Hence, it’s better to assume that, not too long in the future, AMC makes another big move, but in the other direction.
That is, a renewed focus on the company’s poor fundamentals will drive a severe re-pricing. Put simply, if you currently hold a position, this should be having you on the edge of your seat.
A Late Summer Reversal
AMC has raised billions selling newly issued shares, but with this substantial share issuance has come severe shareholder dilution.
If that’s not bad enough, while the company has used a good portion of these capital flows to pare down debt, it’s had to use quite a bit of it to absorb continued operating losses as well.
That’s because the company has still yet to fully recover from the impact of the Covid-19 pandemic on movie theater attendance.
Box office figures so far this year have trailed that reported in 2023. This trend is expected to continue through the busy summer movie season. Best case scenario, the 2023 U.S. summer box office could be down 27% compared to summer 2023.
Admittedly, this is largely due to the impact of last year’s Hollywood union strikes, which affected and delayed film production.
That may not matter much to investors, when AMC next reports fiscal results. This is expected to occur sometime in early August.
Poor quarterly earnings and a dilutive equity raise could reverse shares in late summer.
Bottom Line: Duck Out Now
Like we’ve noted before, all signs point to further downward spiral for AMC shares.
To get its financial house back in order, AMC needs to sell or issue billions worth of additional new shares. At least, based on the company’s $4.5 billion in total long-term debt.
Even if such heavy dilution ends up happening, it may still not be enough to stem further losses. Irrespective of whether there is additional shareholder dilution, a further slump for the movie business stands to weigh down further on the stock.
Need even more convincing? Unless results improve dramatically, the AMC stock meme saga is going to eventually reach the final chapter: Chapter 11. If you’re still sitting in the theatre, there’s no need to sit through the credits. Consider it time to duck out.
AMC stock earns a D rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
