What happened

Shares of AMC Entertainment (AMC -5.17%) continued their steady descent on Tuesday, falling 5.6% heading into midday trading. Shares of the movie theater operator have fallen 12% over the past week and are down 35% in the last month.

So what

AMC has become the premier meme stock, and while its shares have lost more than half their value from the peak they hit in early June, they remain 1,560% above the level they traded at when 2021 started.

Girl wearing face mask in theater

Image source: Getty Images.

The current stock decline, though, suggests a weakening of resolve among the theater operator's self-proclaimed "apes" heading into AMC's second-quarter earnings report next Monday.

While the stock chat rooms still exhort traders to "hodl" (a deliberate misspelling that first occurred as people rushed to type "hold!"), with less than 16% of shares sold short and only a day or less for short-sellers to cover their positions (anything over seven days is considered a lot), traders may be having doubts their hoped-for short squeeze will actually occur.

Now what

AMC's earnings are not likely to be pretty. While theater attendance slowly continues to climb, and AMC said the release of Black Widow helped it notch its busiest weekend in the past 16 months with 3.2 million moviegoers worldwide, it's a far cry from pre-pandemic levels. 

With the U.S. Centers for Disease Control recommending even vaccinated people wear masks indoors again, the potential for movie attendance trends to weaken once more rises.

AMC was losing money before the pandemic, so its stock trading north of 40 times sales is an overvaluation even given this leisure stock's falling share price.