The attraction of AMC Entertainment Holdings (AMC 1.33%) among meme stockholders may have finally begun to fade. The stock showed some small signs of life after CEO Adam Aron introduced an AMC non-fungible token (NFT) earlier this month for its Investor Connect members, a group for self-identified AMC shareholders. But the rise was much and it didn't last.

AMC stock has lost roughly 56% of its value from its June high. Unfortunately for AMC investors, Aron's marketing initiatives will likely not make up for the secular declines in the theater business. Given the theater industry's challenges, AMC still looks more like a portfolio killer than a solid long-term investment.

Masked moviegoers stare intensely at a movie screen in a theater.

Image source: Getty Images.

The state of AMC

AMC stock has experienced a wild ride in 2021. It began the year at $2.21 per share before investors on Reddit's WallStreetBets took an interest. That rising popularity would take it as high as $72.62 per share in June. The stock has bounced around a bit since then. However, since mid-November, it has steadily declined and was selling around $30 per share for much of December.

Amid the stock activity, the theater chain remains in recovery mode. Third-quarter attendance of 40 million came in well ahead of the 22 million reported in the second quarter and 7 million from the first quarter. Also, while attendance in October was 72% of October 2019 levels, the company reported that admissions revenue came in at 90% of the levels experienced in that month. Additionally, November appears promising as AMC experienced its second-biggest day of ticket sales in history with the pre-sales for Spider-Man: No Way Home, a movie that Sony will release in partnership with Disney's Marvel on Dec. 17.

However, AMC stock sells for a P/S ratio of eight. While far below its June sales multiple that exceeded 26, it remains far more expensive than its rival Cinemark, whose stock sells for two times sales.

Moreover, AMC has lost more than $1.1 billion in the first nine months of 2021, including $224 million in Q3, and analysts expect the losses to continue through at least next year. The company's forecasts do not dispute the analyst predictions. Aside from a Q4 box office forecast of $2 billion and a positive EBITDA, management offered few predictions on its finances.

AMC's challenges and its responses

Even worse for AMC stock, secular bear trends have affected the movie theater industry. Home viewing and sound systems have improved considerably and can mimic the movie-going experience in some cases. The pandemic gave some homeowners more incentive to invest in such home upgrades, and these viewers may have little reason to return to theaters. Also, other experiences such as gaming and social media compete for the public's attention.

Such factors may not necessarily mean the demise of movie theaters. AMC has experienced some success as Aron has more directly addressed stockholders and customers. AMC reached the aforementioned $72 per share stock price when Aron offered free popcorn to retail investors. Moreover, AMC pledged in November to begin accepting the Shiba Inu cryptocurrency as payment before offering its NFT.

However, the stock may have reached the point where it needs more fans than cheerleaders. Stocks tend to perform well when propelled by prosperous, fast-growing businesses, and the comparisons to 2019 show the company is still in recovery mode. Also, before the meme stock interest, AMC stock had not sold for above $20 per share since 2018, before the pandemic decimated its finances. This could bode poorly for the stock's prospects should meme investors lose interest.

Investors and AMC stock

Given the growth of box office receipts in recent quarters and the massive pre-sales for the Spider-Man film, AMC will probably survive the pandemic. Moreover, the actions by Aron to engage customers and stockholders could help set AMC apart from its competition.

However, amid the rise of other entertainment options and home theaters, the secular bear trends in the theater industry will likely not disappear. Once the struggles become more apparent to investors, the entertainment stock could have trouble maintaining its current price.