A ‘Reel’ Problem: AMC’s Script Is a Tragicomedy of Meme Stock Madness

Stocks to sell

Many news stories about AMC Entertainment (NYSE:AMC) have nothing to do with the movie business. Sure, meme stocks are in the headlines again, but serious investors should stear clear. We conducted our due diligence on AMC Entertainment stock and, when all is said and done, we’re only willing to give the stock a “D” grade.

If you browse through the news items that are supposed to be about AMC Entertainment, most of them are mainly about an entirely different company. AMC Entertainment is being influenced by a trend disregarding its fundamentals and financials. Let’s discuss the details about AMC Entertainment, as this film combines comedy, drama, and tragedy.

AMC Entertainment Stock: We’ve Seen This Movie Before

In case you didn’t get the memo, meme lord “Roaring Kitty” (real name Keith Gill) is back on social media. You can go here for our detailed explanation of his return and short-squeeze traders pumped up the GameStop (NYSE:GME) share price.

AMC Entertainment stock caught a bid, as well. That’s really an afterthought, though, as most of the recent news items focus on GameStop first and foremost.

This should be off-putting to sensible investors. The weighing machine of the market is, for the time being at least, malfunctioning, as the AMC Entertainment share price doesn’t reflect the company’s fundamentals.

Furthermore, the risk-adjusted prospects are unfavorable as AMC Entertainment is extremely volatile now. For example, many traders assumed that AMC Entertainment shares would gain value when “Roaring Kitty” held a YouTube livestream on June 7.

Yet, the livestream was largely considered a disappointment and AMC Entertainment stock fell 15.2% to $4.91 on June 7. It just goes to show how unpredictable and vulnerable meme stocks can be in the short term.

AMC Entertainment and the Weighing Machine

Sooner or later, the weighing machine of the financial market will function properly again. That’s bad news for AMC Entertainment’s long-term shareholders, as the company isn’t in great condition.

Unfortunately, AMC Entertainment is addressing its massive debt burden by creating/circulating a whole lot of shares:

Will AMC Entertainment continue this pattern of issuing more shares and raising dilution concerns? Remember, the company had roughly $4.5 billion of long-term debt but only $624.2 million worth of cash and equivalents at the end of 2024’s first quarter.

Credit-rating firm S&P Global Ratings just cut its issuer credit rating on AMC Entertainment from CCC+ to “selective default.” Also, S&P Global Ratings sees the company’s May 15 debt-for-equity exchange transaction as “distressed and tantamount to a default.”

AMC Choose Reality Over Irrationality

S&P Global Ratings noted AMC Entertainment’s “heavy debt burden” as a risk factor. We’re citing it as a major concern, as well. It’s also unsettling that AMC Entertainment is evidently so eager to put more of its shares into circulation.

AMC Entertainment shares carry high volatility risk. Oddly enough, many recent news items about AMC Entertainment don’t involve the film industry at all.

Instead, the headlines are highly focused on GameStop and the meme-stock trend. What will happen when the trend ends, though?

When the music stops, as they say, you don’t want to be left high and dry. So, investors should be extremely cautious about AMC Entertainment stock, and we’re assigning it a “D” grade today.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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