AMC Entertainment (AMC) – Download AMC Entertainment Holdings, Inc. Class A report had an eventful March. The cinema company’s share closed the month with gains of over 30%, thanks to news that the company had acquired a larger stake in a gold mine, along with positive trends in the broader market.
So far in April, AMC has cooled down. Looking only at its valuation, Wall Street has been skeptical of the stock’s future.
But we often go against the Wall Street grain. So let’s take half a glass on AMC.
(Read more from Wall Street Memes: Aterian Stock: The Latest Short Squeeze On The Block)
1. AMC’s economy is in good shape
In March, AMC’s management announced that the company had had the best quarter in the last two years. And while the nearly 60 million moviegoers who bought tickets represented only 64% of pre-pandemic levels, the fourth quarter showed that it’s only a matter of time before ticket sales return to normal.
On an annual basis, revenue increased by 620% in the 4th quarter. Beverages and food revenues reached 87% of pre-pandemic levels averaging $ 6.38 per serving. That’s a lot better than the $ 4.74 per person AMC made in the fourth quarter of 2019.
But perhaps the best news was that AMC achieved positive earnings before interest, tax, depreciation and amortization (EBITDA) as well as positive operating cash flows. Thanks to the impact of the COVID pandemic on the cinema industry, AMC’s balance sheet had been a major concern.
Of course, AMC has a lot to thank its loyal shareholders for. Because of their share purchases, management was able to raise just over half a billion dollars in cash to shake off the ghost of bankruptcy.
And now with about $ 1.8 billion in cash and cash flow, AMC no longer has to worry about playing defense. Instead, it can think of growth.
2. AMC’s management has a long-term growth plan
CEO Adam Aron has a plan to create long-term value for AMC and its shareholders. His goal is to match AMC’s high valuation with the company’s fundamentals.
The money from AMC’s share price increase has been and will be used for three main initiatives:
- Investment in the infrastructure of its core business, the cinemas
- Repayment of corporate debt
- Investment in mergers and acquisitions for the future growth of the company
AMC has already announced investments in its cinemas, such as upgrading its IMAX and Dolby Cinema premium screens. The company also launches NFT programs and accepts payments via cryptocurrencies – initiatives that should attract a young, tech-savvy audience.
As for the second target, AMC is in the process of discussing refinancing its $ 5 billion debt with various stakeholders to reduce future interest payments.
And finally, when it comes to future investments, AMC has bold plans to sell its branded popcorn. It also invested in the gold and silver mining company Hycroft (HYMC), which CEO Adam Aron sees as a long-term source of profit.
3. AMC has “Meme Stock” Power
The so-called “smart money” has criticized the meme frenzy that started in early 2021. But more than a year later, this trend is still continuing and has created chaos on hedge funds betting against AMC stocks.
Meme stock investing is characterized by retail investors betting on stocks, not because of their business base, but instead of defeating short sellers. AMC has been one of the meme darlings and has remained popular on Reddit’s meme stock trading threads.
Thanks to meme investors, the AMC stock has returned an incredible 1,060% since the beginning of last year. Their unwavering buy-and-hold optimism and demand for the stock has essentially made AMC’s business foundation irrelevant.
Currently, short-term interest in AMC is rising – more than 20% of the stock’s float, according to the latest data from Yahoo Finance. So there is a good chance that meme investors can provoke a new card squeeze and send AMC’s stock back to stratospheric levels.
(Disclaimer: This is not investment advice. The author may be long one or more stocks mentioned in this report. The article may also contain affiliate links. These partnerships do not affect editorial content. Thanks for supporting Wall Street Memes)