AMC Entertainment (NYSE: AMC) stock price has remained being under intense pressure this year even as American indices have surged to their record highs. It is stuck below $5 having dropped by over 20% this year. The stock is down by more than 90% from its highest point in August last year.
AMC is going through major challengesAMC Entertainment’s share price has lagged behind the market this year as investors remain concerned about its business. There are serious concerns about its future now that the Box Office industry is not doing all that well.
The other big concern is that it has a mountain of debt and other liabilities like lease agreements. AMC accumulated most of this debt during the pandemic when it was forced to close its stores as the central planners viewed it as non-essential. It has over $4.56 billion in debt and $883 million in cash.
The most recent AMC news was its earnings, which came out on Wednesday. These reports showed that the company’s business was not doing well, leading to a 10% drop of its stock in the extended hours.
The results showed that its business slowed in the fourth quarter as attendance rose by just 5% because of Taylor Swift’s Eras Tour movie. Its revenue during the quarter jumped by 11.5% to $1.1 billion as the company increased revenue per patron, which stands at $12.83. The CEO, Adam Aron, also blasted the company’s critics saying:
“There is so much garbage information floating around Twitter, YouTube and other corners of the Internet about AMC. Conspiracy theories abound. Facts are distorted.”
The biggest concerns about AMC Entertainment is that the management will still need to raise additional capital this year. They raised over $885 million in 2023 by selling APE and common shares. While this is possible, I don’t think the company will raise more funding this year.
AMC’s capital raising activity have hurt investors but were highly necessary as the company works to reduce its debt and servicing costs. The management believes that these actions have helped it to reduce its future interest expense by $44 million.
The other issue that is affecting the AMC stock price is that the movie industry is expected to slow rapidly this year. For one, because of last year’s Hollywood strikes, there is a likelihood that there will be no major releases in par with last year’s Barbie and Oppenheimer.
AMC stock price forecast
AMC share price crashed hard after publishing its financial results. It dropped to a low of $4.44, which was lower than Thursday’s close of $4.99. Still, this price is a few points above the year-to-date low of $3.53.
As shown above, the stock has largely moved in a horizontal direction in the past few months. I believe that it has now moved in the accumulation phase of the Wyckoff Method, which could be followed by the mark up phase, which is characterised by strong gains.
The main reason why this may happen soon is that there are signs that meme stock traders are back. For example, most meme cryptocurrencies like Pepe and Floki Inu have surged in the past few weeks. The same could happen for AMC now that the weak economic numbers from the US point to potential rate cuts.
As I have argued before, AMC is a high-risk and high-reward investment. The biggest risk is where it foes bankrupt, which is highly unlikely. On the other hand, the stock could rise to at least $10, more than doubling from the current level.
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