AMC Entertainment Share Forecast January 2022 – Time to Buy AMC?
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Shares of Movie theatre chain AMC Entertainment (NYSE: AMC) are in the red today, after closing at $18.32 as of January 19th (19:59 EST). AMC Shares have fallen steadily because the market has been much harsher toward speculative and unprofitable stocks. Investors should prepare for the possibility that AMC can become a penny stock in 2022.
AMC Entertainment – Technical Analysis
According to the financial statement released by AMC Entertainment, the market cap of the company is at $9.416 billion with total assets worth $11.058 billion. Revenue for 2020 was at $1.24 billion with a profit margin of -368.37% compared to $5.47 billion in 2019.
Moving averages such as Exponential Moving Average (10)(21.53), Simple Moving Average (10)(21.49), Exponential Moving Average (20)(23.86), Simple Moving Average (20)(24.75) and Exponential Moving Average (30)(25.76) are indicating a sell action. Oscillators such as Stochastic RSI Fast (3, 3, 14, 14)(0.00), Williams Percent Range (14)(−95.80), Bull Bear Power(−7.15) and Ultimate Oscillator (7, 14, 28)(39.90) are neutral.
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Recent Developments
AMC experienced a troublesome year as lockdowns hampered movie theatre chains. Revenue for AMC Entertainment fell 77% from 2019 to 2020, totalling just $1.2 billion for this year. Since it was already losing money when running at full capacity, losses piled up as business slowed down. The company did what was needed to stay in business, between debt and selling new shares. AMC shares were roughly heading into $2 for 2021.
AMC Shares were also targeted by short-sellers. They borrowed shares to sell them in the hopes of repurchasing them at a later date. However, a surge in retail interest created a short squeeze on AMC stock. This sent it as high as $72 which is a 36-fold increase on just a few months. The company’s management capitalized on the momentum, by issuing 11.55 million shares. This produced $587 million which bolstered the balance sheet and got the company out of peril.
The actions AMC Entertainment took to stay afloat before the short squeeze has bloated the total number of outstanding shares. While the company had about 100 million outstanding shares as it entered 2020, that number has increased by 5 fold in the past 2 years. This did not make the company valuable, as the money it raised came from downgrading the values of existing shares.
Should You Buy AMC Shares?
As the company issued more shares, each share investors own now represents less revenue, less cash flow, and less income. This means that shares are 80% less valuable than they were when the total number of shares was 100 million. Not only have many shareholders had their stakes diluted, but the company’s fundamentals have also decreased. AMC’s balance sheet of $1.6 billion in 2021, will not be anough to keep the company running for long.
Investors should also note that AMC’s revenue fell almost 80% in 2020. Revenue recovered by increasing 26% in the first nine months of 2021. AMC isn’t close to recovering to pre-pandemic levels. While vaccinations made the situation better, the rapid spread of Omicron could put the breaks on the company’s rebound.
AMC Entertainment is in far worse shape compared to what it was before the pandemic. This is without taking into consideration the share dilution. AMC, which created a name for itself during the meme stock phenomenon in 2021, isn’t attractive to investors any more. The AMC share price ultimately followed the fundamentals of the company, which aren’t in good shape. Considering this now is not the time to buy AMC shares.
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