Are AMC shares worth buying now?

AMC shares are now falling. The meme stock rally appears to be losing momentum. So is now the right time for me to buy this stock?

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

AMC Entertainment (NYSE: AMC) shares have been falling recently. I can’t say that I’m really surprised. It’s part of the meme stock trend that has pushed the share price to stellar levels.

But it appears that reality is starting to set in. The stock has now fallen dramatically from its peak level. I covered the the cinema operator last month and said I wouldn’t buy just yet. I still stick with this view.

The valuation remains far too high for me. As I mentioned before, just as the meme stock investors have piled in, they can also easily start selling too. And I think this is just the start of it. I reckon the momentum rally is starting to lose steam.

Meme stock

Despite the recent share price fall, AMC shares remain a hot stock for small investors. I monitor yolostocks.live regularly and the company regularly appears within the top 10 most discussed stocks on Reddit.

In fact, AMC is currently the top trending meme stock according to this website. To me, this means the share price could be volatile going forward.

Clearly, retail traders still have the company in their sights and it doesn’t make sense to me to buy a stock that’s currently over-inflated. That’s especially so for a company that carries a significant amount of debt.

Things are changing

But the environment is improving for AMC. Most of its sites are open and the continued vaccine rollout should help. What’s encouraging is that pent-up demand is starting to show.

The company recently announced that it set another post-reopening attendance record. It helps when high-profile movies such as Black Widow are released. In fact, more big films are due for release, which should help the firm. It should encourage people to go to the cinema for a big-screen experience.

Recent news

The company has also recently been in the limelight as it shelved its proposal to ask shareholders to allow the cinema chain to issue up to 25m more shares. In a filing with the Securities and Exchange Commission (SEC), it said the proposal has been withdrawn from the agenda for its annual meeting of stockholders.

Previously, AMC had said that it’s looking at share placings to fund potential acquisitions as well as to pay down its staggering debt pile. I’d like to see more focus from the company to tackle its liabilities first.

Cineworld

AMC shares are in a similar predicament to those of Cineworld. The environment seems to be favourable, but the companies are leveraged up to their eyeballs. In fact, according to shorttracker.co.uk, Cineworld shares are within the top five most shorted stocks on the London Stock Exchange. This is where investors are betting that the share price will fall.

For now, I’m steering clear of the stock. I reckon AMC shares could be volatile given their meme stock status.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »