AMC Entertainment’s stock fluctuated on Friday as speculative trading activity increased. After soaring as much as 38% earlier in the day on Friday, the stock is now down 5%. Despite the intraday pullback, shares have gained more than 100% this week, bringing the year’s massive 2021 surge to 1,200%.
On Thursday, AMC was by far the most active stock on the New York Stock Exchange, with approximately 700 million shares traded. According to FactSet, its 30-day trading volume average is little over 100 million shares.
On Jan.27, the stock reached a new high of 1.25 billion shares traded, and AMC could set a new high on Friday with over 360 million shares already traded by midday. Edward Moya, senior market analyst at Oanda, said, “The retail trader is at it again.” “AMC500k and AMC Squeeze were trending on Twitter yesterday, and the stock price climbed above the end-of-January high seen at the height of meme stock mania.” According to a Bank of America study of stock mentions on the notorious WallStreet Bets Reddit website, the movie theatre chain has surpassed GameStop as the most common stock.
Reddit traders are encouraging each other to double down on AMC stock and call options by posting screenshots of their portfolios and boasting about the huge profit potential. ”$AMC YOLO UPDATE: 4948 shares, 10 calls, across 4 brokerages, and I still ain’t selling!” reads one popular post on WSB Friday.
According to data from S3 Partners, AMC’s rally this week has already cost short sellers $1.3 billion. AMC’s big rally this week may be due to short covering. Short sellers are forced to buy back borrowed shares as a heavily shorted supply rises, closing out their short position and reducing losses. Though its company began to rebound as a result of the economic recovery, AMC continues to face significant challenges, including theatre capacity and competition from streaming services.
Long term, the only thing that matters is that this business will never make money again,” said Rich Greenfield, co-founder of LightShed Partners, on CNBC’s “Squawk Box” on Friday. With their current capital structure, they will never be able to produce cash. Prior to the pandemic, it was trading at 7 times EBITDA. It’s now trading at 25 times EBITDA, and the changed market has placed it in a worse spot. This simply defies logic.
