It's not about the mess found in the balance sheet or the short sellers that are eating away at the stock's price like a pack of vultures.
It's really about the feeling of things going back to normal. And what better way for that to happen than by short squeezing a bunch of nerds?
Simply put, we're riding off the short squeeze theme that has entered 2021. Take a look at GameStop (my article here if you missed it) and Bed Bath & Beyond. GameStop had a massive short interest of 138%. Bed Bath & Beyond had a short interest of 61% and AMC holds similar interest with 68%. It's time to admit that the internet is a force to be reckoned with when it comes to equities. You may laugh at r/wallstbets, but watch out for them to smoke your position and leave you homeless.
- Short squeeze potential fits the theme.
- NY Governor Cuomo wants to re-open movie theaters and restaurants. AMC has 1/3 of its theaters in California and NY.
- Economic recovery through vaccination.
- Psychological pivot. We want to return to normality and movie theaters give us an EXPERIENCE. Yes, we can stream, but we as humans can't stay at home all the time (unless you're me).
Economic re-opening and vaccinations
New York Gov. Andrew Cuomo said on Tuesday he wants to start opening restaurants, theaters and offices by launching rapid testing sites in New York City and eventually at hundreds of new sites in other city centers throughout the state. Someone could theoretically get tested and in 15 minutes go to a dinner or movie, under the Democratic governor’s plan, which he said could also help get more people onto mass transit. Cuomo said he’ll partner with the real estate community and work with local governments to reduce bureaucratic hurdles. I'm sure. But alas, this is a positive statement from Cuomo on the recovery of movie theaters.
With a large percentage of AMC theaters belonging in California, this is a positive sign. More vaccinations in California can hopefully lead to a faster return to normalcy. My point remains on vaccination across the nation and giving AMC a shot to evade bankruptcy as we are now, hopefully, at the turning point of the pandemic.
Psychological pivot towards normalcy
People want to leave the house, the whole 'staying inside' theme has washed off. People will raid the capitol and set cars on fire but won't sit down at a movie theater? Give me a break. It's a cultural thing woven into America. Sitting on our asses and watching Hollywood on the big screen is what makes us great.
- The 50 day moving average is a target price to move towards at 3.02.
- The 200 day moving average takes us to another milestone, and if we get there that's almost a 100% return on your money.
- High buying volume on the last session (January 15th) on no news. This is the work of FinTwit.
- Shorts will be on it, and if big buyers end up selling, this can tank again. Remember, this is a pure speculative play on the short squeeze theme.
- As you can see, AMC has been on the downtrend for a while. Thanks, streaming companies.
- This stock can obviously go to zero, but these are all time lows right now.
AMC may have debt issues, like needing to secure an additional $750 million to meet its liquidity requirement in 2021. AMC has raised $200 million in funding so far, having secured $100 million in debt funds last month from Mudrick Capital Management. I believe if they are to climb out of this hole they would need a buyer, and what's most attractive to buyers is the fact that AMC is the largest movie chain in the world. It's rumored that AMC will only have enough cash to survive to the end of Q1 this year.
The fate of movie theaters lie on looming potential of big ass catalysts involving possible buyout, merger talks, positive bankrupt news, and of course the enormous community of Finance Twitter.
Expect a tug of war, this company may come with a lot of bad news in the coming weeks. Tread carefully, you don't want to be caught holding a bag. Buy dips and sell pops.
**Not a financial advisor. Articles are opinion only.
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