Will the stock crash and burn?? Well in this video you guys are gonna find out this is an essential video to watch because amc stock has been on a rampage and i’m going to dive into
what’s been driving this meteoric rise in AMC’s Stock Price? (up 1900%!)
Fundamentals of the AMC Stock
so without any further ado let’s hop right into it!
TIME STAMPS: 0:00 – 0:53 – Intro 1:02 – 1:15 – AMC stock price 1:20 – 5:40 – AMC Stock Analysis 5:47 – 7:05 – AMC Short Squeeze 7:06 – 7:40 – AMC Gamma Squeeze 7:41 – 8:55 – AMC Reddit 8:57 – 10:30 – AMC Bear 1 cent 10:31– 12:25 – AMC Trading
AMC SHARE PRICE, up 1900%?
Price action for amc cinemas so if we go back to 2019 let’s see how amc was doing pre pandemic and we can see the share price was steadily declining from 2017 he was down 80 percent even before the whole global pandemic so what was driving amc’s lower stock price well a variety of factors firstly the company has really high debt which i’ll get into later in this video.
From two dollar lows in january 2021 the stock popped by over 1900% percent now the stock has since corrected down now and the stock is corrected down by 24 but that still leaves the stock if we go from here still leaves the stock up 000 year to date so that’s just really incredible incredible returns for a lot of those diamond-handed investors who were investing in trading amc stock or is this a crazily risky stock to invest into.
MOVIE THEATRE HEADWINDS: STREAMING WARS!
The second major driver is a headwind against the movie theater industry which is driven by streaming service providers such as netflix.
People would rather watch a movie series watch a movie at home on netflix or on another provider such as amazon video amazon prime then actually go out to a cinema this really is a change of habits generationally which has happened across the board!
SHORTER RELEASE TIMES (MOVIE THEATRES TO STREAMING)
Third major headwind against the movie theater industry is the fact that many major networks have agreed now to shorter release time so if you guys are a bit older you remember 10 20 years ago if you watched a movie in the cinema you’d have to wait a few months to actually get that video on a dvd on a video tape to watch it in your home and now all the major networks have agreed that they will now have much shorter release time .
So people will watch them very very early but this is bad news for the movie theater industry but all these headwinds have resulted in amc stock price having a major decline pre-pandemic so this company was not looking very good in terms of its fundamentals but then of course the major pandemic hit and this was actually even worse news for amc and all movie theater businesses because people couldn’t actually go and use their facilities and the company was still burning a heap load of cash as they still have to upkeep all their facilities okay so if the movie theater industry is going for a terrible time why is the stock up by nearly 2000%.
FUNDAMENTALS OF AMC STOCK?
During the global pandemic amc’s revenue plunged and it sank 77% down for the full year of 2020 to 1.2 billion and amc reported a net loss of nearly 4.6 billion.
so this company was burning billions of billions of dollars in cash now this was compared to a loss of just 149 million in 2019 so the company burned through cash at a rate of more than a hundred million dollars per month during most of 2020 and at the same time face deferred rent payments.
AMC RAISING CAPITAL?
Amc’s management did do a really smart move so when they saw their share price skyrocket what they actually did was raise some capital so they issued new shares in order to actually raise real money to support the business so the company raised 1.2 billion dollars in the second quarter by issuing new shares that’s on top of the more than 1 billion raised through share sales last year in the first quarter of the year .
This is a really smart move by amc although not great news for existing shareholders of the company because it will dilute them. But it may be the only thing amc can do to survive and this really could become a self-fulfilling prophecy, if people believe so much in amc or they just want to play this momentum game and trade the stock upwards,
If amc keeps issuing shares and raising billions of billions of dollars then there is a small chance the company could survive but otherwise it’s not looking very good for amc stock from a fundamental level hopping into the numbers here you can see things a little bit more clearly.
AMC FINANCIAL PROJECTIONS & HIGH DEBT:
So the company is expecting 2.4 billion dollars in revenue in 2021 which is expected due to cinema’s reopening across the world however the company will still have over 1.3 billion dollars in losses this is expected to improve to 4 billion in revenue by 2022 and 369 million dollars in losses so the company is projecting some improvements there but really the elephant in the room is the company’s high debt so amc cinemas is eight times levered and this high debt will really weigh down the company moving forward in the future.
IS AMC’S Stock Price Rise a SHORT SQUEEZE?
We can see the short interest over time for amc has really fluctuated between five billion dollars and three billion dollars so currently around 15 to 16 percent of amc’s float.
However, I believe this isn’t driven by a short squeeze and that hypothesis is driven by looking at amc’s trading volume.
The company has a trading volume of 3.2 billion shares traded now the fact that there are only 500 million shares outstanding makes me think that this is actually one of the most traded stocks in the world this isn’t a lot of diamond-handed investors holding this stock for the long term this is a lot of people trading the stock and getting fast gains now the smartest and the fastest among them will be making a lot of money but on the corrections and the crashes there will be a lot of people who will be left holding the bag.
IS AMC STOCK A GAMMA SQUEEZE?
What is a gamma squeeze?
A gamma squeeze can happen when there’s widespread buying activity of short dated call options for a particular stock this can effectively create an upward spiral in which core buying triggers higher stock prices which results in more call buying and even higher stock price.
Amc’s major stock gains has been driven by a gamma squeeze and also by the retail investor exuberance behind this stock which is really one of the classic meme stocks (in my opinion).
HOW AMC CAN SURVIVE?
if amc wants to survive it needs to raise more capital and issue more shares . however to do that it needs a shareholder vote so it’s clear that amc actually needs these retail investors to actually support the company and allow them to dilute their shares.
It’s pretty clear even looking at competitors the amc stock has overvalued from a fundamentals level
MOMENTUM TRADER OF AMC?
If you’re a momentum trader in this stock ( which i personally wouldn’t recommend) , you need to live and breathe the stock charts because that’s the only way you’re going to survive and looking at the stock charts right now it’s pretty clear the stock’s pretty in line with its moving average at the moment.
The stock can move sideways for a brief period of time but ultimately fundamentals do usually prevail in the end and then the stock could head south and it may head north before it may head back to these $60 level again. But it could head south again to around 10 per share or less so good luck guys.
THIS IS NOT financial advice.
Thank you guys so much for watching i wish you all luck in the markets and i hope you all have an incredible day and i’ll see you in my next video and they’re safe .
