Shares of AMC Entertainment Holdings (AMC) continue to move lower as the stock has now sold off 40% off its recent all-time high. This is no surprise as the fundamentals have made no sense. Not only has the management issued 400 million new shares, diluting shareholders 5x over, but the movie theater business has fundamentally changed. Just this weekend, movies have debuted in AMC theaters while also being released on Disney+ and other mediums. The revenue split is almost 50/50 which is extremely bad for AMC. This will continue to take a huge bite out of the possible future growth for AMC. While the Wall Street Bets crowd continues to pump, volume has dried up significantly. This shows a lack of new buyers. As the stock falls, more and more of those Reddit buyers will get scared and dump.
The technical chart on AMC shows no major support until the $32.00 level, a key gap fill. Investors should expect a bounce there, but short lived. Ultimately, a deleveraging event will occur that will take AMC down to $15.00 where it may have a shot of holding.
History has shown us that stocks can get out of wack in the near-term fundamentally, but eventually come back to their general market valuation. A great example was the dot.com era in the late 1990’s.
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