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Why AMC Entertainment Stock Was Falling Today

By Jeremy Bowman - May 19, 2021 at 1:20PM

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Shares of the movie theater operator dipped on a broader sell-off in meme stocks.

What happened

Shares of AMC Entertainment Holdings (AMC 9.34%) were cooling off today as the stock got swept up in a broader sell-off of popular day-trading targets like meme stocks and cryptocurrencies.

As of 12:06 p.m. EDT, AMC stock was down 10.1%, while other Reddit stocks like GameStopExpress, and Naked Brand Group were also down substantially.

The entrance to an AMC multiplex

Image source: AMC Entertainment.

So what

AMC shares had rallied over the last week after the company closed a $428 million at-the-market offering last Thursday, gaining as much as 42% over the four-day period and reaching its highest point since the initial meme-stock rally back in January.

Today, however, the trend in the stock reversed itself as a sell-off in cryptocurrency -- which seemed to start when Tesla CEO Elon Musk's said his company would stop accepting Bitcoin -- accelerated today and spread to meme stocks.

Notably, the sell-off in AMC shares came as the U.S. economy is rapidly reopening, a bullish sign for the performance of the business. In fact, today New York, New Jersey, and Connecticut ended most COVID-19 restrictions, an important step in allowing movie theaters to return to full capacity in AMC's biggest market.

Now what

AMC's share price has been divorced from the business' fundamentals since January during the short squeeze that saw shares of AMC, GameStop and other stocks skyrocket in just a few days.

The company's market value has never been higher despite it now being loaded with high-interest debt and its share count having grown by more than four times during the crisis. Meanwhile, the long-term prospects for movie theaters seem dim given the rise of video streaming.

Despite those concerns, AMC stock seems set to keep trading based on technicals and emotions for the foreseeable future as it's a favorite of traders on social media who often try to pump the stock higher. Expect the volatility in the entertainment stock to remain.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bitcoin and Tesla. The Motley Fool has a disclosure policy.

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Stocks Mentioned

AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
AMC
$25.88 (9.34%) $2.21
Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$878.87 (-0.48%) $-4.20
GameStop Corp. Stock Quote
GameStop Corp.
GME
$41.45 (2.27%) $0.92
Express, Inc. Stock Quote
Express, Inc.
EXPR
$2.13 (5.45%) $0.11
Bitcoin Stock Quote
Bitcoin
BTC
$24,696.46 (3.18%) $762.12
Naked Brand Group Limited Stock Quote
Naked Brand Group Limited
NAKD

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