Shares of AMC Entertainment rose again on Thursday as speculative trading activity skyrocketed among movie theater chain stocks among Reddit-obsessed day traders.
The stock rose as much as 4% on Thursday and rose 35.7% to $ 28.52 on the session, taking its week-to-date gain to nearly 120%.
According to an analysis of stock mentions on Bank of America’s platform, AMC has overtaken GameStop to become the most liked stock in the infamous WallStreetbets Reddit forum.
With its massive rally on Thursday, AMC has split from its mem stock peer GameStop, which made Wall Street history in January with a 400% lower squeeze in a single week. Shares of GameStop were up a very small 4.8% on Thursday after rallying 15% in the previous session.
One of the trending posts on the WallStreetBets chatroom on Thursday said, “AMC Rocket Ship,” while another said, “All my savings invested in AMC! Good luck to me guys.”
The so-called short coverings could contribute to AMC’s massive rally this week. According to data from S3 Partners, the company has about 20% less sold of its float shares, while a typical US stock holds 5% less interest on average.
“AMC short sellers are covering some of their exposure, reversing their short selling trend in the recent month,” said Ihor Dusanivski of S3 Partners.
When a heavy short stock jumps sharply higher, short sellers are forced to buy back borrowed shares to close their short positions and cut losses. The rally is further fueled by coercive buying.
According to statistics, short sellers betting against AMC have lost $ 1 billion this week alone.
Wall Street analysts are stunned about a jump of more than 1,200% in AMC’s stock since January. The company, which has nearly $5 billion in debt and $450 million in deferred lease repayments, has seen a significant reduction in revenue due to the ongoing coronavirus pandemic.
While the movie theater business is restarting, AMC still faces huge hurdles. Although the company ended the first quarter with $ 1 billion in liquidity, the highest ever in its 100-year history, Cash on Hand would only save AMC until 2022. Movie theater chains will also need audiences to return to theaters. In droves for months with no revenue.
While initial box-office receipts are promising, the fundamentals of the movie theater business have changed over the past year, including theater capacity, shared release dates with streaming services, and the number of movies playing in theaters.
For the first quarter, AMC posted $148.3 million in revenue, down 84.2% from the same period a year ago. Its net loss in the quarter narrowed to $567.2 million, or $1.42 per share, from $2.18 billion, or $20.88 per share, a year ago.
Despite earning significantly lower revenue in 2021, the valuation of AMC has nearly tripled due to these new retail investors. On the last day of 2019, AMC had an enterprise value of $ 5.8 billion, about $ 13.4 billion on Wednesday.
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