AMC Entertainment Holdings Inc (NYSE: AMC) is a stock that has become the black sheep of Wall Street as of late, with article after article, warning investors that they should stay away from the stock at all costs.
But how did one of the most successful movie theaters in the world become the black sheep of Wall Street? Was it COVID-19? You would think, but no!
The fact is that short sellers have been passing around a silver platter filled with bovine feces and telling investors that it’s quality due diligence. They have convinced even the experts that AMC stock is going to fall to zero. They’ve urged retailers to stay away, all while their short positions resulted in significant losses for the very investors that they say their reports are designed to protect.
Well, I’m going to get quite a few experts upset with me here, but the fact of the matter is that you can’t blindly follow names like Citron and Hindenburg research, like many covering AMC stock have been doing.
The War Wages On
Recently, retail investors have shown they’ve had enough of the hedge fund manipulation through short positions that rob small investors of the value in the stocks they care about. The war became clear when GameStop went for a tremendous run for the top, essentially becoming the figurative symbol that retail investors painted on their chests before going to war.
Since, we’ve seen short squeezes on several stocks, and in my view, it’s just the beginning.
AMC Is The Next Battleground
The tension between the bears and the bulls is heating up when it comes to AMC stock. To be fair, I’m going to outline both arguments here:
The bears have a relatively simple argument. They argue that movie theaters in general have been losing their luster over the years, and that the COVID-19 pandemic will be the final nail in the coffin for these businesses.
Moreover, the bears say that while various movie theaters are opening back up, fears surrounding COVID-19 will keep sales at a minimum, ultimately handing these companies a financial weight that none of them will be able to hold up.
Ultimately, the bears say that at the moment, we’re experiencing the death of movie theaters as we know it, and that if you invest in these companies, companies like AMC, you’re going to experience losses.
I want to be very clear here, if I haven’t been already. I am a believer in movie theaters. Moreover, I’m a believer in AMC and the company’s ability to rise from the ashes like the phoenix and that those with short positions should stop spreading smut about this opportunity.
So, what’s the deal?
The real deal here is simple. Movie theaters are an iconic form of entertainment that aren’t going anywhere any time soon. In fact, I believe that we’ll soon see a big uptick in revenue among movie theaters for two very big reasons, and that AMC will be a prime beneficiary of this activity. Here’s why:
- COVID Could Actually Revive The Movie Theater Experience. Throughout the COVID-19 pandemic, consumers have been stuck at home. As vaccines get jabbed into arms, consumers aren’t just more willing to get out of the house, they will have a strong desire to do so. After all, it’s a whole new, and for the vaccinated, safe world out there. Why not explore again? With the movie theater experience being an iconic one in the United States, movies and dinner will likely become a major date night plan yet again. So, while short sellers say COVID will kill theaters, I say it has the potential to breathe new life into them.
- Summer Is Coming. Consumers being willing to travel couldn’t come at a better time for the movie theater industry. Summer is the time when the biggest blockbuster releases come, and with summer just around the corner and vaccines finding their ways into arms, there’s a strong chance that we’re going to see a significant boost in revenue among movie theaters.
Beyond the fact that movie theaters are likely to make a big comeback very soon, the company is sitting on a solid financial foundation. Even through all the pain, AMC has plenty of cash on the balance sheet, with the CEO telling investors that the company has no plans to sell a single newly issued share in 2021. That’s a strong statement from a company that bears say can’t afford to survive.
The Next Battle Is Coming Soon
I recently wrote a post about a short squeeze that’s likely coming to AMC stock, and it was met with quite a bit of feedback from both sides of the coin. I got praised and cursed tens of times throughout the day. It’s clear that emotions surrounding the stock are high, and those high emotions are likely to lead to explosive movement.
Chances are, that movement will be in the upward direction.
As mentioned at the beginning of this article, retail investors are getting tired of hedge funds and other big money institutions selling stocks short, essentially taking gains out of their pockets. As we saw with GameStop, retail investors have tremendous power and can send the stock screaming for the top at will as long as they work together to do so.
Given the chatter on various social networks, including the Wall Street Bets reddit, retail investors are gathering their ammunition, putting on their armor, and gearing up for war. All told, there’s a short squeeze on the horizon.
The Bottom Line
The bottom line here is simple. AMC stock represents a compelling opportunity. Not only because retailers are sick and tired of institutions playing with their money, but because the company, even in the midst of a pandemic, has been able to maintain financial strength and because a major recovery is coming for movie theaters.
Considering this, the short squeeze is exciting, but the long term prospects provide even more to look forward to.