AMC Stock News and Forecast: AMC rises 10% as meme stocks return

AMC Entertainment (AMC) is a name that has been well covered by us and other outlets, but just for those new to the story here is a recap. AMC operates a global cinema chain and as a result, looked set for bankruptcy during the initial stages of the covid pandemic. However, retail traders caught hold of AMC among others and pushed the stock higher in a sort of societal backlash against Wall Street greed and a perceived uneven playing field. Both AMC and GameStop (GME) had been heavily shorted by institutions and hedge funds. AMC managed to neatly capitalize on this interest by raising equity in order to fend off the bankruptcy, which short-sellers had been betting on. 

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AMC stock performance

Since those heady days, retail traders have faced increasing hurdles in their fight against institutional traders. Many retail stocks have fallen sharply as the US economy and stock market outlooks have become more negative. Ironically, many of the stocks targeted by retail traders were high-growth stocks with limited balance sheet power and deep value characteristics to weather the coming storm in equity valuations. The poster child of such largesse, Cathie Wood's Ark Invest, has seen the value of its flagship ARKK fund fall 52% this year. AMC stock finds itself down a similar amount – 52% year to date and 76% versus one year ago.

AMC stock CEO goes quiet

AMC CEO Adam Aron has always cropped up to rouse the retail troops whenever needed but he has been noticeably quiet this past few months as the stock has suffered. A keen Twitter user, Aron has engaged with many of the new retail traders in an attempt to better understand his new shareholder base. So will we may see or hear more from Adam Aron now that AMC stock has staged a turnaround of sorts? AMC rallied 10% on Tuesday, and retail traders are back on the short squeeze mantra as evidenced by a similar performance from GME. With imminent inflation data out on Friday and a series of rate hikes penciled in though, this rally may be difficult to sustain. 

In addition to AMC, read more on SPY.

AMC short squeeze

Tuesday saw a strong rally into the close for both AMC and GME as a Reuters report circulated that highlighted growing short interests in both names. This appeared to rouse the AMC apes for one more advance with both names posting strong gains in the last hour of trading. AMC finished Tuesday up 9.37%, while GME posted an even more impressive gain of 14.36%.

AMC diversification: Will it work?

AMC and Adam Aron have been nothing if not innovative in their quest to expand and advance the AMC cause. Only recently did we get the left-field acquisition of a gold miner to go with AMC's core cinema business. Yes, it caught many by surprise as AMC took a stake in gold miner Hycroft Mining (HYMC). HYMC stock exhibited huge volatility on the announcement as retail traders followed their CEO leader into the stock. However, this initial enthusiasm has been short-lived with HYMC stock falling from $3.10 just after the investment to currently trade at $1.35. AMC has also announced other initiatives such as accepting the crypto currency for payment and the launch of AMC popcorn. 

AMC to face growing headwinds

Despite all the furor, AMC remains under significant pressure. AMC stock is down 76% over the past 12 months. Despite moviegoers returning to cinemas in large numbers and a strong backlog of blockbusters such as Top Gun, Marvel, and Jurassic Park movies, the balance sheet debt levels remain a significant headwind. In order to survive, AMC renegotiated rent payments and took on increased debt levels. With a rising yield environment, both rents and interest payments will continue to hinder AMC's balance sheet and make it uninvestable in our view. 

AMC stock forecast

AMC stock remains in a strong bearish trend with the stock trading well below the main moving averages. Each spike in AMC fails at a lower level and is then followed by a move to lower lows. AMC is struggling for any momentum and despite Tuesday's impressive gain the short-term moving averages remain flatlined, indicative of a total lack of momentum. The longer-term moving averages though show us that momentum is to the downside. 

$8.95 remains the next support and is key to holding any hope for bulls. Below is likely to see increased selling from momentum hedge funds and other trend following systems. Given the nature of the fall this year and its extent, it is likely that any short entry positions are considerably higher than here, so any attempt at squeezing said shorts is difficult and unlikely in our view.

AMC chart, daily

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