Should I buy AMC shares today?

AMC shares have had a lot of momentum recently. But what’s been driving the stock to dizzying new heights? I take a look at the cinema operator.

| More on:

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.

Cineworld cinema

Image source: DCM

AMC Entertainment (NYSE: AMC) shares are in the limelight. In the past month, the stock is up more than 75%. And in the last 12 months, it has increased by over 1,200%.

But what’s been driving the share price? Well it’s a ‘meme’ stock. Let me explain further.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Meme stocks

It’s no surprise that the pandemic has taken its toll on AMC. Most of its cinemas were temporarily shut during lockdown. But institutional investors, such as hedge funds, have been short-selling the stock.

It’s a fancy way of saying that they have been betting that the AMC share price would fall. However, retail investors have been collaborating on Reddit (WallStreetBets). These small traders have been egging each other on to buy the stock.

The surge in AMC shares has meant huge losses for the short-sellers. These small investors have also targeted other stocks like GameStop. These have become meme stocks or online phenomena that have gone viral.

According to, AMC is the sixth most trending meme stock. Needless to say the shares are still being monitored by retail traders.

Should I buy AMC shares?

In short, the stock is on my watch list. There are a few reasons why I’m not buying yet. The first one is the high valuation. Clearly, the Reddit traders have been driving AMC stock higher, which means that the share price is over-inflated.

At some point this meme stock rally is going to run out of steam. So just as the stock rose very quickly it could rapidly fall too. These small traders may also decide to take profits on their holdings. The high valuation means that AMC shares are going to be sensitive to any negative news.

My second reason is that I don’t think the influence of online traders on the AMC share price is going to end anytime soon. As I mentioned, the cinema chain is among the top 10 stocks being discussed by Reddit users.

I think it’s worth highlighting here that even AMC has acknowledged its retail investors. In its recent shareholder counter announcement, the company mentioned that “more than 80% of AMC shares are held by a broad base of retail investors with an average holding of around 120 shares”.

So what does this mean? Well, whether these small investors buy or sell, I expect there to be some share price volatility. I don’t think meme stock trading is over just yet.

In fact, AMC launched its ‘Investor Connect’ platform where it plans to reward its retail investors with incentives such as free popcorn. So far, the shares have held up well. But I’m unsure how long this is going to last.

The company

The environment is starting to look favourable for AMC. It has now reopened its sites, especially in the US. And the vaccination programme should encourage people to go and watch movies on the big screen. Over the coming months, new long-waited films are expected to be released, which should also help the company’s recovery.

These should act as tailwinds for AMC shares. But I’m not buying just yet.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Nadia Yaqub has no position in any of the shares 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.

More on Investing Articles

A person holding onto a fan of twenty pound notes
Investing Articles

3 top dividend shares to beat a new recession

I believe that good dividend shares are my best approach to keeping my money safe in a recession. Here are…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Down 80%, this growth stock is a ‘no-brainer’ buy

Growth stocks have faced a torrid time recently. However, after falling 80% since its highs, this FinTech looks too cheap…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Warren Buffett is pouring money into stocks! Here’s a FTSE 100 pick I think he’d buy

Warren Buffett has been investing in several US stocks recently. Here's a FTSE 100 stock I think he'd also be…

Read more »

A Rolls-Royce employee works on an engine
Investing Articles

Is the Rolls-Royce share price on the verge of recovery?

A recent trading update showed the company is benefiting from increased flying hours, so will the Rolls-Royce share price soon…

Read more »

Girl showing thumb up, excited about upcoming shopping
Investing Articles

Is now a good time to buy Tesco shares?

After a strong rally last year, the Tesco share price has stalled. Roland Head gives his view on investing in…

Read more »

The BT Tower looming above London's skyline
Investing Articles

3 reasons to buy – and not buy – BT Group shares

The BT Group share price has a rock-bottom valuation right now. Is this a red flag or does it make…

Read more »

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

2 cheap FTSE 100 dividend shares! Should I buy?

These two FTSE 100 dividend shares offer terrific value for money, on paper. Should I load up on them today,…

Read more »

Cheerful young businesspeople with laptop working in office
Investing Articles

5 steps to target a monthly £300 passive income

With his eyes on a target of monthly passive income, here are five steps our writer would take to try…

Read more »