Don’t Expect Encore Performance From AMC Stock

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AMC Entertainment (NYSE:AMC) has been taking investors’ emotions on a roller-coaster ride since coming into the spotlight in early 2021 amid the frenzy of stock-mem trading. But with Uncertainty in the market is causing investors to take a “risk-off” stance, the show may finally be over for AMC stocks.

Since hitting an all-time high of $72.62 in early June, AMC shares have fallen nearly 80% to around $15 a share. Admittedly, most of the sell-off has to do with market changes, not changes related to the company itself. That The cinema chain recently reported fourth-quarter results that were in line with expectations.

Although the self-described “AMC monkey” may have held on, less confident investors said goodbye to AMC stocks as they exited the riskier game in response to the prospect of higher interest rates. And with economists warning a Russo-Ukrainian war could lead to a US recession, this once deemed unsinkable meme game may be on the verge of its last major move lower.

AMC Stock Troops No Longer In Combat Form

AMC Entertainment fans who call themselves the “Army of the Monkeys” are proud of the epic battles they won against hedge funds, individual short sellers, and commentators who pointed out that the “Emperor has no clothes” (including when it actually happened).

They might entertain each other with war stories from 2021 onwards Reddit, but they are just that: stories. In 2022, AMC stock troops are no longer in combat condition. Of course, “retail has a float” is a factual statement. But that doesn’t mean everyone who holds the stock is willing to hold on to it to the bitter end. Many of these retail investors entered AMC stocks recently and saw losses intensify.

Likely, they bought their shares from other retail investors who had the same thoughts before deciding to cut their losses and move on. These new retail shareholders will likely exit the same way, repeating the process.

Of course, the most vocal apes still believe there is a legion of individual shareholders behind them who can beat “smart money” at its own game by bidding AMC stock to past price levels through collective stock purchases. However, with most of the current shareholders most likely of the sunny weather variety, I anticipate they will flee the battlefield en masse at the next sign of trouble.

Farewell to Meme Madness

The Russo-Ukrainian war just might have ended the meme craze in AMC stock, albeit indirectly.

The conflict could result in an economic slowdown due to Western economic sanctions against Russia which caused commodity prices to soar. Prior to this, the market could react negatively again, resulting in declines equivalent to those experienced in December and January.

When this panic sets in, the fans of the sunny weather will come out right away. As they exit, potential buyers will be looking at the fundamentals more and less on the Reddit thread.

In this case, investors will look to buy at a price that is more in line with the underlying value of the stock. Based on the calculations presented in my previous article on AMC stock, at best, the base value is around $8.25 per share. That’s 47% below current prices.

Investors may not even be willing to pay that much for shares. The economic slowdown will question how quickly the AMC can complete its post-pandemic recovery. And the next market vortex could lead to a sharp drop in stocks, perhaps to levels seen before anyone had ever heard of meme stocks.

Bottom line on AMC Stocks

AMC CEO Adam Aron has many tricks to improve AMC’s operating performance. Recently, that has included allowing moviegoers to buy their tickets using “meme coins”, as well as plans to have hot popcorn delivered to your door via Uber (NYSE:UBER).

While creative, these ideas don’t justify a $7.9 billion market cap, $18.7 billion company value, or optimistic encore performance. It’s been a great show, but it’s about time AMC stocks came off the stage.

As of the date of publication, Thomas Niel does not have (either directly or indirectly) a position in the securities mentioned in this article. Opinions expressed in this article are those of the author, subject to InvestorPlace.com Publishing Guidelines.

Thomas Niel, contributor to InvestorPlace.com, has been writing single-stock analyzes for web-based publications since 2016.

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