Among the companies that most directly benefited from the Roaring Kitty-led rally in meme stocks, AMC Entertainment (NYSE:AMC) stock certainly saw the similar sort of move many investors would have expected to see on excitement around the next wave of investor interest in short squeeze stocks.
AMC’s recent rally has certainly appeared to be short-lived. After surging above $10 per share approximately one month ago, shares of AMC stock have continued to decline below the $5 level at the time of writing.
Indeed, as GameStop (NYSE:GME) has done in issuing new shares every time the stock pops, AMC’s management team has shown an inclination toward coding the same. This comes as the theater chain sees slower attendance and cash flow growth than expected coming out of the pandemic, which is needed to pay down the company’s massive debt load.
AMC stock can only really rally with strong operating performance. The company’s valuation is roughly the same from a market capitalization standpoint as it was prior to the pandemic, but one could make the argument its position in the market has been permanently impaired. Here’s why I remain very bullish on AMC’s long-term outlook from here.
Roaring Kitty Makes It Worse for Meme Stocks Like AMC
Keith Gill, also known as the Roaring Kitty, gave life to meme stocks as he returned to social media after more than three years in hiatus.
While Gill’s focus is clearly on GameStop (and the move in that stock has been even more impressive of late), AMC has traditionally rallied as a top meme holding of many. In fact, some have speculated Gill owns some AMC stock in other accounts, due to his cryptic movie reference tweets.
His latest post is a screenshot from “The Dark Knight,” showing Heath Ledger’s Joker with a kitten mask, sparking speculation about hidden messages in the fur.
Some believe the mask shows the number five or the word AMC, correlating with AMC’s stock price. Despite the original kitten photo debunking these theories, speculation has persisted, fueled by a livestream clip where Roaring Kitty hints at hidden meanings in movie references.
Roaring Kitty’s return to social media included a livestream and posts showing his GameStop positions totaling $586 million. Despite a disappointing Q1 report causing GME to drop 30%, premarket trading saw the stock rise 5% rise.
We’ll have to see if Gill shifts his focus away from GameStop, but for now it does appear he’s sticking with this company as a core pick for the long-term, at least according to what he said in his livestream.
Wall Street is Pessimistic on AMC Stock
https://www.tipranks.com/stocks/amc/forecast#google_vignetteWall Street has a mixed bag of sentiment when looking at AMC stock. Seven analysts have issued skepticism toward the company, with four hold ratings on the company and three sells. Even with the stock’s recent decline, most analysts believe there’s more downside ahead.
There are even some of the more bullish growth-focused firms out there issuing rather bearish price targets on the company. Analysts at Wedbush expect AMC stock to decline to $3.50 from $4 per share, issuing a “neutral” rating.
However, Citi (NYSE:C) analysts have a different opinion, and expects the stock to reach $3.20, even greater downside from here.
Tuttle Capital Management’s Matthew Tuttle says that the recent meme rally have boosted notable meme stocks like AMC and GameStop. Although this could be a sign that now may be an opportune time to buy meme stocks, it’s his view that this is more of a trade than a sustainable bet.
AMC is a Sell
Although AMC witnessed a recent bounce, I think now’s the time for any investors who are still up at the table to walk away with their winnings. This is a company with poor long-term fundamentals.
Foot traffic continues to remain depressing, and the company is only able to survive because of its willingness to increase its share count any time retail investors do their best to raise its valuation. That’s not a recipe for long-term success.
In my view, the company is going to be the next Blockbuster, and is simply on borrowed time thanks to retail investors. The thing is, I think the market has already spoken, and the defiance of certain investor groups won’t change the fact this is a company with a business model that’s fundamentally broken.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.