AMC Entertainment’s stocks fluctuated on Friday as speculative trading activity continued to escalate.
The stock closed 1.5% after rising 38% on Friday. Despite the intraday reversal, stocks rose more than 116% this week, bringing their monstrous rally to 1,132% in 2021.
More than 650 million AMC shares changed hands on Friday, far exceeding the 30-day trading volume average of 106 million.
AMC was by far the most active stock on the New York Stock Exchange on Thursday with almost 700 million shares. The share recorded its highest trading volume on January 27, with 1.25 billion shares.
“The retailer is back,” said Edward Moya, senior market analyst at Oanda. “The AMC500k and AMCSqueeze were trending on Twitter yesterday, and those momentum pushed the stock price above the late January high we saw during the height of the meme stock mania.”
The cinema chain has overtaken GameStop as the most popular stock on the infamous WallStreetBets Reddit forum, according to Bank of America’s analysis of share mentions on the chat page.
Avid Reddit traders encourage each other to double up AMC’s stock and call options by sharing screenshots of their portfolios and announcing massive returns. A trend post on WSB Friday reads: “$ AMC YOLO UPDATE: 4948 stocks, 10 calls, over 4 brokerages, and I’m still not selling!”
GameStop, the star of the show amid January’s retail mania, fell 12% on Friday, reducing its weekly profit to 25%. AMC’s 2021 profits also exceeded GameStop’s 1,078%.
AMC’s surge this week resulted in a $ 1.2 billion loss to short sellers, according to data from S3 Partners.
Brief coverage could fuel AMC’s massive rally this week. When a heavily short stock bounces higher, short sellers are forced to buy back borrowed stocks in order to close their short position and reduce losses. The forced purchases tend to accelerate the rally even further.
AMC is a heavily shortened name that, according to S3 Partners, sells about 20% of float stocks short, compared to an average of 5% of a typical US stock.
As business began to rebound amid the economic reopening, AMC is still facing severe headwinds, including theater capacity and competition from streaming services.
The company, with roughly $ 5 billion in debt and $ 450 million in deferred lease repayments, saw its revenue decline sharply due to the coronavirus pandemic.
“All that matters here in the long term is this company will never make money again,” said Rich Greenfield, co-founder of LightShed Partners, on Friday in CNBC’s “Squawk Box”. “They will never generate cash with their current capital structure. It was trading at 7 times EBITDA before the pandemic. It is now trading at 25 times EBITDA and is in a worse position today with the changed industry. That contradicts just any logic. “
– CNBC’s Sarah Whitten contributed to this article.
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