The AMC (NYSE: AMC) share price has put in a staggering performance over the past 12 months. The stock is up around 1,200% during this period.
However, since the beginning of June, the rally seems to have run out of steam. So what’s going on with the AMC share price, and what could be next for the stock?
Considering the outlook
It’s impossible to predict where stocks will trade in the next few months, or even years. Nevertheless, in theory, a stock price should track the underlying performance of a business, in the long run.
Therefore, to answer the question of what could be next for the business, we have to consider the company’s outlook over the next few years.
This isn’t easy to predict. The world’s largest cinema operator has suffered a significant setback over the past 12 months. Not only have most of its theatres been forced to close, but it also had to raise billions of dollars in debt and additional financing to keep the lights on.
While management has been proactive in raising cash from shareholders and other stakeholders to reinforce the balance sheet and reduce debt, at the current rate it could take years for the group to balance the books.
And that’s what really concerns me. If markets lose confidence in the business, it’ll be harder for the cinema group to raise cash, which could jeopardise its future.
On the other hand, if the company can retain market confidence and keep its balance sheet under control, it could have a bright future. As the world’s re-opening, cinema-goers are returning. This is generating revenues and profits for the business.
AMC share price risks
Another risk to consider is the rise of streaming platforms. The streaming industry has impacted cinema revenues, but it hasn’t been as bad as expected. Analysts have been speculating for years that streaming services such as Netflix will eat away at cinema revenues. This seems to suggest that while this is a threat, AMC and its peers will be able to deal with the risk.
So, to answer the question, what is going on with the AMC share price? I think the answer is the market’s waiting. The market wants to see whether or not the reopening will translate into growth and how this will impact the company’s outlook.
What’s more, there’s been some speculation management will raise more cash from investors. This could further improve the company’s financial position.
Considering all of the above, my view on the AMC share price remains the same as it was a few weeks ago. The company could be a good recovery investment if it can reinforce its balance sheet further, and consumers return in large numbers.
That’s why I’d buy the stock as a speculative investment for my portfolio.