AMC Entertainment stock (NYSE:AMC) has seen episodes of short selling, short covering, and plain old buying and selling since its debut as a “meme stock” in early 2021.
Is it possible that continuous short selling in AMC will result in a rebound owing to covering or a short squeeze? Or does it imply a contrarian opinion along the lines of “It’s so horrible, it can only get better”? Or are the short sellers accurately predicting that AMC’s near-term future resembles a grim movie?
Market Analysis of AMC Stock
AMC stock (NYSE:AMC) short-interest ratio is at 2.4. That is the number of days it would take to cover and close the total number of shares sold short.
The short interest rate is published twice a month. The most current short proportion of AMC stock (NYSE:AMC) is 19.14%, a 1.1% decrease from the previous report in mid-September.
So, what does this imply about the stock’s current prospects? Even though the proportion of shares shorted is significantly lower, there are several reasons to be pessimistic about the company.
Many other stocks would struggle to match such a bleak, unbroken run of price falls. Sure, AMC stock (NYSE:AMC) has had a few months of increases here and there, but as you can see, no rally has been able to last. Short sellers get the point of their efforts.
While pandemic-related movie theater closures were an apparent setback, they were only one more gut hit to an already struggling industry. In terms of volume, movie theater ticket sales peaked in 2002. Sure, some movies are better in theaters, and there are always some who claim, “I prefer the theater experience to stream at home,” but the truth is that attendance has been declining for 20 years.
Furthermore, if prices rise and people fear a recession, discretionary expenditure, such as entertainment, may fall. That’s particularly true for a day at the movies when purchasing tickets for a family and food and beverages (where cinemas truly earn their money) can be an expensive undertaking.
The consumer discretionary sub-industry of movie theaters seems to be in trouble. Stocks like Imax (NYSE:IMAX) and Cinemark Holdings (NYSE:CNK) have also been declining, with little upward potential in recent years. In other words, the issue here isn’t necessarily one of internal AMC weaknesses.
On a more positive note, AMC’s reorganization helped it to avoid bankruptcy, and the company’s appeal among retail investors allowed it to raise some much-needed capital. In each of the last five quarters, revenue has increased by a factor of three or four.
Analysts on AMC Stock
Analysts’ average recommendation for AMC stock (NYSE:AMC) is “hold,” and the current price objective is $3.75, representing a 39.12% downside.
Given all of the facts available regarding the stock, the bull thesis does not seem to be particularly compelling.
However, shorting a stock isn’t the only option to wager against it, and it may be hazardous. If you believe a stock will fall in value, put options may let you express your opinion while minimizing risk. As usual, consider the risks involved and how your selection fits into your overall investment philosophy and available investable funds before going long, short, or using options in any stock.
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Author Okoro Chinedu 
