AMC Stock News and Forecast: Record high inflation causes AMC to sell off

UPDATE: AMC stock is following Thursday's lead on Friday and trading down 2.8% at $12.42 nearly an hour into the session. The good news is that AMC is actually besting the Nasdaq, which has tumbled a whopping 3% as May's Consumer Price Index, a measure of inflation, came in higher than expected due to heightened gasoline prices. The CPI printed at 8.6% YoY, much higher than the 8.3% predicted by economists. The inflation rate is the highest in 40 years. The market is reading this continued high inflation as a sign that the Federal Reserve may have to raise interest rates higher than expected, which would make stocks (especially growth stocks) less valuable compared with bonds. AMC share did not benefit as much from May's bear market rally and thus have less gains to give back.

AMC stock has lost some of its luster since Wednesday's high. The excitement surrounding a possible short squeeze brought many long-time traders back into the name, but the enthusiasm did not hold. At the moment the global cinema chain is touting its summer blockbusters and hoping several of these major titles will bring families back to the silver screen. Before the covid pandemic, AMC routinely brought in $5.5 billion in annual revenues, but reaching even $1 billion per quarter now seems quite difficult. News of a return of short-sellers to meme stocks like GameStop (GME) and AMC perked the attention of the retail crowd mid-week, but so far the shorts seem to have the upper hand.

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AMC stock performance

Despite losing 5.5% on Thursday to close at $12.78, AMC stock is still up 6.6%. The retail crowd momentarily bought up shares in the first half of the week on news from Reuters that big institutional short-sellers were once again betting against AMC. AMC even gained 9.4% on Tuesday. Once the short squeeze did not materialize though, traders took profits on Thursday. AMC now seems to have developed a bit of overhead resistance just above $14. Bulls are hoping that the blockbuster season ahead this summer turns the share price around. AMC shares are down 51.8% year to date in line with other risky stocks that are selling off now that the Federal Reserve is raising interest rates to fight inflation.

AMC stock bull case rests on summer blockbusters

AMC's business and full-year outlook is very dependent on the summer blockbuster season. These are Hollywood's biggest movies that draw large groups of friends and family to the big screen for often the only time all year. The summer in the northern hemisphere has begun with two flicks that AMC CEO Adam Aron is counting on. First, Top Gun: Maverick has already done more that $160 million in US ticket sales and more than $300 million worldwide. The US fighter pilot movie starring Tom Cruise even beat a 15-year record on Memorial Day Weekend.

The second flick that AMC needs to do well is also part of a franchise. Jurassic Park: Dominion is actually the sixth movie in the Jurassic Park franchise based off the original book by Michael Crichton. Analysts expect the film to gross between $137 million and $167 million. Making it toward the top of that range would be a bullish sign for AMC. AMC has already led the way in raising ticket prices for these blockbusters, with some tickets going for $15 to $20 rather than the more normal $10 to $12.

AMC short squeeze dissipates

This was supposed to be the return of the short squeeze week. Thursday's sell-off has made it seem like that is not the case, and so far Friday's premarket is also not bid. S3 Partners produced data in the first part of the week that Reuters quoted showing that AMC and GME were both seeing their highest level of short-selling in a year. It was about 18 months ago in early 2021 when both names were subject to the famous short squeeze that caused Melvin Capital to lose billions of dollars and eventually fold. That episode scare many shorts away, but now they seem to be returning once again. S3 Partners's data said that 22% of AMC's stock float was sold short. This was one percentage point lower than even GME.

AMC Entertainment now in mining business

AMC and Adam Aron have moved from the silver screen to the gold mining industry. At least they are sticking to metals. Adam Aron raised a tremendous amount of money during the pandemic due to AMC's unnatural share price cause by the short squeeze. Aron used that money to invest nearly $28 million in a down-and-out gold miner in Nevada named Hycroft Mining (HYMC), in which it purchased a 22% stake. AMC bought 23.4 million shares for approximately $1.19 a share, although the cinema chain also recieved a roughly equal number of stock warrants. Though HYMC shares intitially traded up to $3 on the news, they closed Thursday at $1.26. Thus far it would seem that AMC's investment has not "panned" out.

AMC has a debt problem

Despite hope for the summer blockbuster season, AMC has $10.7 billion in total debt on its balance sheet. The company has five time the number of common shares as it had in 2019. In the first quarter of 2022, AMC reported half a billion dollars in negative operating income. The market is going to want to see positive cash flows and a reduction in debt before they give AMC the benefit of the doubt.

AMC stock forecast

AMC stock has quite the unattractive long-term chart. AMC shares are down 74% over the past year, quite a ways from when they were trading above $60. On the daily chart below, however, there are some optimistic signals for the bulls among you. First, the 9-day has crossed above the 20-day moving average. Then there is the Moving Average Convergence Divergence (MACD) which is trending higher toward the zero threshold. The blue line leading the orange line is also bullish in the short term.

AMC stock has already experienced resistance at $14 however. To put in a new range high and make the short-term chart resolutely bullish, AMC must close above $16.13, the high from May 31 that also coincides with a resistance ledge from the early part of the month. AMC has put in two higher lows in the past month. If it cannot overtake $16.13 though, then it is doomed to fall back to support at $10.50. 

AMC chart, daily