A lot can happen pretty fast when you're following a meme stock. Remember Monday of last week? Shares of AMC Entertainment Holdings (AMC) soared 45% in a single trading day. It was a glorious pop -- taking the stock from $20.24 to $29.33 -- but it lacked substance.
Box office receipts continue to clock in well below their pre-pandemic levels. Insiders keep selling into strength. Even if you believe in AMC's pivot from projector to prospector last month with its puzzling investment in a gold mining penny stock, that deal is not going to move the needle anytime soon at a multiplex operator with an enterprise value approaching $20 billion.
If the shorts were getting squeezed last Monday, the pressure didn't last long. The shares went on to give back nearly all of their 45% gain in the seven subsequent trading days. On Wednesday this week, AMC stock closed at $20.39. It was a round trip to nowhere.
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The art of dunking
AMC CEO Adam Aron has done a lot of good things. He has leveraged his ascending cult status on social media to rally the leading movie theater operator's millions of retail investors, encouraging them to become steadier customers for the chain itself. He's handed out free popcorn and movie screenings, and his cheerleading is probably an important reason why AMC is gaining market share in a troubled industry.
Yet there's a dangerous side to this cult of personality. Aron brags a lot when his stock is rising, extravagantly sprinkling his tweets with #CHOKEonTHAT and #LetThemEatCrow hashtags. Litigation attorneys are likely going crazy with the screenshots, knowing that there will come a time when he and his company will have to pay the tab for all that hype.
AMC shares have come a long way from where they were a couple of years ago, but their monster rallies have typically proven to be unsustainable. It wasn't just last week's huge single-day rally that was erased. AMC stock has shed a quarter of its value in 2022 alone, and the stock's close on Wednesday was 72% below the peak it set in early June 2021.
You might think that watching the stock plunge by 72% over the last 10 months would nudge the AMC camp toward a kernel of self-awareness, but there's more bluster than humility in play at the movement. Swagger is off the charts, even if the stock chart warrants a little less bravado.
Things do not have to end badly at AMC. Folks aren't going to movie theaters the way they used to -- year-to-date domestic box office receipts are 44% below where they were in 2019, and at least 53% off from levels set in 2018 and 2017. However, AMC is doing a great job of monetizing the audiences that are showing up. The content pipeline will improve in the coming months. Studios know by now that, for the most part, folks are only choosing a trip to the multiplex over streaming at home when the film they want to see is a big-budget superhero or action flick. It's not a secret recipe.
Whether or not the multiplex industry ever comes close to where it was two decades ago when audience levels peaked, AMC is setting itself apart from its weaker theater-chain rivals. It will likely be the last of the movie theater companies standing if ticket sales fail to return to their pre-pandemic levels. That said, AMC will have to do more than just speculate on mining stocks to deliver sustainable investor returns from here.
