Will AMC Reach $1000?
AMC stock after reaching a high of $60, on 18th June 2021, has been on the down journey and is on the verge of becoming a penny stock. (Last traded price was $7.33 on November 28th, 2022). The question popping into my mind is whether will AMC reach $1000 ever which is its all-time high
AMC stock is a popular meme stock that was saved from bankruptcy by retail traders in 2020 and 2021. Retail traders turned AMC into meme stock just like Gamestop and there were a couple of reasons to invest in AMC. New-age investors did not want the theatre chain to fail as they all felt nostalgia and also wanted to keep the wealthy people accountable.
Factors Against AMC Stock
Reporting Loss in every quarter After Covid pandemic disaster, the entertainment industry is back on its feet and the revenue for AMC is soaring, but the profitability is yet to come. In the third quarter earnings, revenue jumped 162% YoY to $1.17 billion, but the company reported a net loss of $121.6 million. For the nine months of 2022, it reported a net loss of $685.9 million. A major part of it is due to the controversial acquisition of Hycroft Mining which is unrelated to the theatre business.
Continuous dilution of equity to raise funds- After AMC was saved by investors, management has taken some weird decisions to raise funds. It has continuously diluted the equity to raise fresh funds. This process has increased the shares outstanding from 135,528 in the second quarter of 2019 to 516,821 in the corresponding quarter of 2022, an increase of 281%. In addition, the company has also announced a special dividend of preferred shares called AMC Preferred equity at the rate of one-for-one. That is one preferred stock for each common share held. This appears to be the new way of raising funds without undertaking the solvency risk.
Financials to Take the Stock to $1000
The above figure shows that AMC was profitable till 2019, but 2020 has changed the equation. It is reporting a net loss every quarter and the total revenue has still not touched the pre-pandemic level.
As there is no net income, Price to earning ratio does not exist post-2019. Also, Price to Sales ratio is dropping year after year with 2021 being an exception. The number of outstanding shares has increased five times which proves that even if there are earnings in the future, earnings per share will be very less.
Also Read: AMC Stock Forecast
Will AMC reach $100: Conclusion
AMC stock is cheap due to its financial performance. While the stock is available at a bargain, the stock is not worth buying.
AMC may get out of operational difficulties in the near future. Still, management’s questionable decision-making and continuous equity dilution are major red flags for the stock for long-term investors.
Will AMC reach $1000? I believe not, and there are strong reasons for the same. Moreover, will AMC touch even $60, the all-time high? I even do not believe that. Continued declines are the most likely possibility.
Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.