The Motley Fool

Should I buy AMC stock today at $59?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Graph Falling Down in Front Of United Kingdom Flag
Image source: Getty Images

As reopening trades go, I think AMC (NYSE: AMC) stock is one of the most exciting. Although that doesn’t mean it’s the best. 

Shares in the company have surged in value over the past six months as investors on Reddit and elsewhere have rushed to buy.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

This has created an interesting situation. The world’s largest cinema operator has been able to ride this enthusiasm to issue more shares, raising $1.6bn in new capital

As a result, the risk profile of AMC stock has drastically changed. The company has increased its cash balance and reduced borrowing, even though it’s been operating under severe pandemic restrictions. 

Raising cash 

In theory, if the company continues to issue new shares, it could eliminate its debt. This would reduce interest costs to zero and could make the enterprise profitable. 

Unfortunately, it doesn’t look as if this is going to happen. In April, management put forward a proposal to issue an additional 500m shares but had to backtrack on this. Still, there are plans in the works to issue a further 25m shares, providing a potential cash infusion of $1.4bn. 

If this plan comes to fruition, I’d buy AMC stock as a speculative investment and recovery play. Compared to its UK peer, Cineworld, the company seems to have a good deal more support from its investors and more flexibility in raising additional capital. 

That’s not to say this business is out of the woods just yet. Revenues are likely to remain depressed for some time. What’s more, it can’t go on issuing new stock forever. For every new share that’s issued, it reduces existing shareholders’ claims on the business.

Therefore, in theory, each share is then worth less. If the company continues to issue new shares, the value of AMC stock may decline. 

AMC stock bucks the trend 

Still, this is just theory. It’s impossible to predict the direction of share prices. The company has bucked the trend and defied critics, so far, and that could continue. 

This is why I’d buy AMC stock. The company has continued to prove its critics wrong and made the most of a bad situation over the past 12 months.

As the global economy continues to recover from the coronavirus pandemic, the corporation’s revenues should increase. And as revenues grow, the company’s improving fundamentals may help drive the share price higher. 

Of course, if the recovery starts to stutter, the opposite could happen. This is probably the most considerable risk and challenge hanging over the enterprise right now, and it’s the reason why I rate the business as a speculative buy.

AMC stock has potential, but it’s not suitable for the faint-hearted. The group’s recovery could fall apart at a moment’s notice. 

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.