AMC stock rallies over 7% to test $13 on Fed-led market optimism

Update: AMC stock price benefited from a relief to the broader markets, received by the Fed’s delivery on the expected 0.75 bps rate hike on Wednesday. Investors cheered the Fed’s strong response to fight inflation, which eased the pressure off the yields and helped calm the market nerves. The meme stock rode the optimism wave higher, also capitalizing on expectations of an impending short squeeze and an upcoming blockbuster movie season. Shares of AMC rallied 7.13% on the day, hitting the highest level this week at $12.97 before retreating to settle Wednesday at $12.77.

AMC stock was boosted on Tuesday due to a delayed response to positive attendance levels for Hollywood's summer blockbuster season. AMC management released the numbers for the June 9 through June 12 extended weekend on Monday, boasting of attendance revenue besting the same period in 2019 pre-pandemic by 15%. However, the market tanked on Monday due to heavier certainty that the US economy was headed for a recession. This is because Friday's headline inflation reading of 8.6% bested forecasts, and now the markets are betting on a "Volcker moment" similar to when Fed chairman Paul Volcker raised interest rates so high that he pushed the economy into a deep recession in 1982. On Tuesday though, investors gave into the good news of higher revenues and a positive blockbuster season.

Also read: Nvidia Stock Deep Dive: Price target at $205 on strong revenue growth

Now AMC stock investors await a decision by the Fed on Wednesday concerning interest rates. Will the Fed offer up another 25 or 50 basis point rate rise and buoy markets or will it try to crush inflation with a 75 or even 100 basis point increase?

CEO Aron impressed by high attendance for Top Gun, Jurassic Park sequels

In the statement to shareholders, CEO Adam Aron was enthusiastic about audiences' response to the first two major blockbuster releases. These are the May release of Top Gun: Maverick, starring Tom Cruise, and Jurassic World Dominion.

“It is so encouraging to see AMC’s admissions revenues topping those of the same weekend of 2019, prior to the pandemic which so depressed our revenues in 2020 and 2021," said Aron. "Clearly, we are seeing positive signs for a continuing recovery of the theatrical box office."

An important detail is that both inflation and ticket prices are way up, so topping revenues from three years prior seems fairly ordinary. AMC Entertainment, however, has had a miserable 2020 and 2021, so we will let them have this one. AMC said 4.9 million attendees came to AMC theatres during the four-day stretch. 

"Having multiple blockbusters in theatres has helped push AMC to achieving another important milestone, beating admissions revenue versus the same weekend in 2019 by a wide margin," CEO Aron enthused. "There is a wonderful quote from Jurassic World Dominion that ‘Life finds a way.’ It is looking too that ‘Theatres find a way.’ ”

AMC stock may benefit from upcoming new movie releases

Besides the success of the new Top Gun and Jurassic Park series additions, AMC Entertainment has a raft of the new movie features it is counting on to boost summer revenue. Pixar’s Lightyear opens this coming weekend, which is already drawing a heavy focus due to one character's parents being in a same-sex relationship. Prominent conservative podcaster Ben Shapiro has said many religious parents will balk at taking their kids to the flick. Negative publicity often leads to popularity though.

Then there is the Elvis biopic that debuts on June 24, Minions: Rise of Gru on July 1, and Thor: Love & Thunder opening on July 8. The next month then is chock full of the kind of blockbusters that AMC turns a profit on. Investors must be crossing their fingers.

AMC's business and full-year outlook are dependent on the summer blockbuster season. Top Gun: Maverick has already done more than $160 million in US ticket sales and more than $300 million worldwide. The US fighter pilot movie even beat a 15-year record on Memorial Day Weekend. Jurassic Park: Dominion is actually the sixth movie in the Jurassic Park franchise based on the original book by Michael Crichton. Analysts expect the film to gross between $137 million and $167 million.

AMC stock performance

Tuesday's 3.8% rally provided some home to AMC stock shareholders terrified from Monday and last Friday's collapse. AMC stock has lost 7.2% over the past five sessions but just 2.6% over the past month. As we noted last week, AMC and GameStop (GME) both benefited in the second week of June due to heavy shorting that drew in investors trying to force a short squeeze. The strategy did not work that well, however, and shares followed the rest of the market lower toward the end of the week. Based on the high from June 8, AMC stock appears to have resistance at the $14 price level. Year to date, AMC stock has lost 55% of its value.

GME stock performance

While AMC stock is typically tied to its short squeeze cousin GME, the latter has mostly been doing better of late. The original meme stock is down only 17.5% this year, though like AMC it has been in a downtrend. Data from S3 Partners showed that AMC stock had 22% of its float sold short at the beginning of June. The same data said GME stock had 23% of its float sold short. On good days when meme stocks rally like this past Tuesday, AMC tends to underperform GME shares. As AMC stock rallied 3.8%, GME almost doubled that at 6.7%.

AMC stock forecast

AMC stock does not look great long term, and FXStreet does not find it a decent long-term bet. The short-term chart does, however, have some proper details to recommend it. First, the 9-day crossed above the 21-day moving average on June 3, which usually is the first straw in any rally. In the past few sessions, though it has dropped back to fall right on top of the 21-day moving average though. The Moving Average Convergence Divergence (MACD) is trending higher toward the zero threshold with the blue MACD line remaining above the signal line.

AMC stock has an inclining series of higher lows on the daily chart. This is a quite positive sign and demonstrates a real support structure. Long-term support remains at $10, but May 12, May 24, and June 13 show that bulls are buying that dip! Now traders need to pummel resistance at $14 and make a new range high close above the May 31 high at $16.13. Beyond there sits longer term and stronger resistance at $20.

AMC chart, daily

---