AMC Entertainment keeps surprising its critics. Three reasons to believe AMC stock is worth buying.
AMC Entertainment ( AMC) Find out more. AMC Entertainment Holdings, Inc. Class A Report was a tumultuous March. The stock of the movie theater company finished the month up over 30%due to the news that it had bought a significant share in an underground gold mine and positive growth in the overall market.
In April so far, AMC has cooled down. Based on its price, Wall Street has been uncertain about the stock’s prospects.
We often are against our Wall Street grain. So let’s take an eye-opening review of AMC Stock.
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1. AMC’s Financials are in Great Shape
In March, the AMC management announced that the business enjoyed the most profitable quarter in the past two years. Even though the more than 60 million people who purchased tickets only represented 64% of the pre-pandemic numbers, the fourth quarter showed it’s just a matter of the time before ticket sales will return to normal.
In a year-over-year comparison, revenue increased by 620% during Q4. Food and drink revenue increased to 87% of the pre-pandemic level, with approximately $6.38 per person. This is a lot better than what $4.74 per patron AMC Stock earned during the year’s fourth quarter.
The most exciting news was that AMC had had positive earnings before tax, interest depreciation, amortization, and interest (EBITDA) and operating positive cash flow. Due to the impact of the COVID virus on the film theater business, AMC’s balance sheets have been a huge issue.
AMC is indeed able to be grateful to its faithful shareholders. Thanks to the stock purchase program, the management raised less than half a million dollars in cash to shake the fear of bankruptcy.
With around $1.8 billion in cash and liquidity coming into the system, AMC no longer has to consider whether it is playing the defense. Instead, it’s able to look forward to the expansion.
2. The Management of AMC has a long-term Growth Plan
The CEO, Adam Aron, has a plan to create long-term value for AMC Stock and its investors. The goal is to align the high price of AMC with the company’s fundamentals.
The cash generated from the appreciation of AMC’s share price was and will be used to fund three primary initiatives:
Ensuring its infrastructure’s primary business, which is the cinemas
Repaying company debt
Insisting on mergers and acquisitions to contribute toward the company’s growth in the future
AMC has already announced the investment in its cinemas, like the upgrading of the IMAX and Dolby cinema premium screen. AMC is also launching NFT programs and accepting payment through cryptocurrency — moves expected to draw a young, tech-savvy crowd.
In the second area, AMC is negotiating a refinancing plan for the debt of $5 billion with different stakeholders to lower the amount of interest that it will pay in the future.
Finally, AMC has big plans to sell its own branded popcorn when it comes to future investments. AMC Stock has also invested in the silver and gold mining business Hycroft (HYMC), which the CEO Adam Aron sees as a sustainable source of revenue.
3. AMC has “Meme Stock” Power
“Smart money” or “smart money” has criticized the meme craze that started in early 2021. However, more than a year after, the trend isn’t stopping and has had a devastating effect on hedge funds that bet against AMC shares.
Meme stock investing is described by the retail investors who bet on stocks that are not based on their fundamentals in business but rather to beat short sellers. AMC has been among the top memes and continues to be prominent on Reddit’s meme stock trading threads.
Because of the meme investor, AMC shares have returned at a staggering 1,060% increase in the first quarter of the year. The unwavering optimism of buy-and-hold investors and the demand for the stock has made AMC’s business fundamentals irrelevant.
At present, the short interest in AMC is growing to over 20% of the company’s float, according to the latest data released by Yahoo Finance. There’s a high chance that meme investors can trigger an escalating short squeeze and cause AMC’s stock to fall back to its highs.
(Disclaimers This is not an investment recommendation. The author might belong to one or more of the stocks mentioned in this report. Additionally, the information may include affiliate hyperlinks. These partnerships do not influence editorial content. Thanks for helping Wall Street Memes)