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Why AMC Entertainment Is Falling Today

By Rich Duprey – Sep 21, 2021 at 12:16PM

Key Points

  • Fears of a global recession are weighing on AMC Entertainment.
  • It would be too early in the recovery cycle for economic growth to sag.
  • The theater operator has fallen along with the market, but has not gained when the indexes did.

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The movie theater operator is showing more weakness than the market as a whole.

What happened

Shares of AMC Entertainment Holdings (AMC 1.36%) continued to fall in morning trading Tuesday despite much of the rest of the market largely rebounding from yesterday's rout. 

Although there was no news specific to the theater operator to account for its 4% decline at noon EDT, retail investors may be showing the weakness inherent in its business.

Moviegoers react with shock.

Image source: Getty Images.

So what

AMC's so-called apes, the retail investors who have rallied around the theater operator's stock believing they are on a mission to defeat short-sellers, have largely held strong, though the company's shares have slid 22% over the past week. 

Growing fear of a global recession could be weakening their resolve because the underlying business of the theater operator is not strong. While a prolonged economic recovery would enable AMC to gain its financial footing, a worldwide decline would impair its ability to do that. 

Now what

As a premier meme stock, AMC Entertainment is going to be more volatile than most other companies, but the persistent decline in its shares as the overall market has fallen indicates a wavering by many investors.

Even with Walt Disney offering to give theaters a 45-day window of exclusivity with the remainder of its 2021 movie lineup, moviegoers still might not be willing to go out.

AMC's stock is up 1,800% in 2021, but with the fundamentals of the business not anywhere near strong enough to support such a valuation, the probability the stock will decline more than it goes up is high.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool has a disclosure policy.

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