What happened

Shares of AMC Entertainment (AMC -1.06%) are headed into Friday's close up around 19% for the week despite a sizable pullback on Thursday, leading (but also outpacing) similar surges from stocks of rival theater chains Cinemark Holdings (CNK -1.30%), IMAX (IMAX -0.12%), and Regal owner Cineworld Group (CNNW.F). The gains were largely logged on Tuesday, following Monday's announcement from the FDA that it had approved its first COVID-19 vaccine based on standards above and beyond the emergency-usage approval that had allowed for the rapid development of a vaccine before now.

Investors viewed the news as a sign that the consumer environment is inching its way back to prepandemic norms. But we mustn't look past the fact that some traders leveraged the FDA's decision to spark another short squeeze for this meme stock.

So what

It's complicated.

For the time being, most movie theaters have reopened, unfazed by the rapid spread of COVID-19's delta variant even though earlier variants of the coronavirus shuttered the movie industry for the better part of 2020. Some patrons are returning to these reopened movie theaters, but others remain hesitant. Domestic ticket sales are running at about half what they were before COVID-19 rattled the world. And as it turns out, many film fans are content to watch new releases offered to them at home rather than on the big screen, and studios are satisfied to make the home-viewing option available as long as theatrical distribution of new movies is hobbled.

The business might not be hobbled for much longer, though, at least according to some AMC shareholders. They suggest the Food & Drug Administration's approval of the COVID-19 vaccine developed by Pfizer (PFE 0.08%) and BioNTech (BNTX -1.85%) marks a turning point in the war against the pandemic. More specifically, they argue that now that the vaccine has gone through the FDA's lengthier and more scrutinous drug approval process, more people are likely to feel comfortable being vaccinated.

And yet that thesis is self-serving. Also on Tuesday, "#AMCSqueeze" was one of Twitter's top trending terms, suggesting the gains were part of a bigger, concerted effort to frighten short-sellers of the stock out of their trades, thereby fueling even more gains. (To close out a short position, the stock must be purchased outright, which can have the effect of lifting that stock's price.)

AMC Chart

AMC data by YCharts.

While far from being the same caliber of meme stock that AMC is, Cineworld, IMAX, and Cinemark are typically grouped together by traders and get pushed in the same direction as AMC shares.

Now what

Be wary of jumping to the conclusion that's being voiced about the Food & Drug Administration's more conventional approval of the COVID-19 vaccine made by BioNTech and Pfizer.

All consumers are pleased the vaccine in question has stood up to the more rigorous standards that don't apply during the search for an emergency solution. But the FDA's decision isn't necessarily changing hesitant minds about the vaccine. A poll taken by The Associated Press's NORC Center for Public Affairs Research in July indicates that 80% of the population that had not yet been vaccinated at the time still isn't likely to voluntarily be vaccinated in the future. Many of these same people also feel the vaccines currently available aren't particularly effective against the delta strain now ravaging the nation, which accounts for the vast majority of new infections within the United States. And that's not a completely off-base concern. Breakthrough cases are occurring, with some data suggesting they're accounting for as many as 10% to 20% of infections.

Don't look for this hesitance to abate either. The Associated Press's NORC Center for Public Affairs Research found, in a separate poll performed this month, that only half of the country's working adults support the idea of requiring vaccinations for on-site employees. Around one-fourth of these respondents outright oppose vaccination requirements.

Given that the nation's population has already become about as vaccinated as it's willing to become, the question now is: What's truly going to restore regular trips to movie theaters, particularly now that studios have gotten comfortable with selling films directly to consumers as streaming offerings?

Moviegoers in a theater.

Image source: Getty Images.

It's not a question that will be answered -- or even acknowledged -- by meme stock followers who have a vested interest in only seeing AMC and its fellow theater stocks move higher. And to be fair, so far, they have not needed to discuss the company's underlying fundamentals or plausible future; they've successfully pushed the stock around by sparking short squeezes or merely leveraging the threat of short squeezes. Their tactics are working.

The passage of time ultimately works against this strategy, though, as it allows investors to weigh theater chains' actual results and compare them to what have turned into steep valuations. Indeed, the poor follow-through on Tuesday's bullish surge turned into losses by Thursday and little movement on Friday, which is telling in and of itself. This result says there just aren't many (if any) buyers left on the sidelines willing to step in.

Given this backdrop, AMC and its peers aren't names anyone besides the most risk-tolerant speculators can really get behind.