AMC: Another Short Squeeze Is Coming Soon

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Summary

  • AMC.Entertainment posted a strong Q1 2022 earnings report, with improvements in revenue, EBITDA, and theatre traffic.
  • The company recently disclosed a 6.8% stake in National CineMedia Inc, which provides pre-movie advertising and marketing in theaters.
  • AMC's short interest currenty sits at around 21% and could trigger a massive short squeeze, as institutions and hedge funds are buying up the stock.

AMC Sells 8.5 Million Shares To Investment Group, As Meme Traders Continue Effort To Rally Stock

Scott Olson/Getty Images News

AMC Entertainment Holdings, Inc. (NYSE:AMC) is well known for its role in the Gamestop short squeeze runup in 2021, where retail investors gathered on Reddit's WallStreetBets to send meme stocks to the moon.

Savvy investors were targeting companies with high short interest to trigger a short squeeze on short-sellers and a gamma squeeze in the options market.

However, meme stocks often fall as fast as they rise, and now AMC is currently down around 52% YTD.

Chart
Data by YCharts

The company recently posted its Q1 2022 earnings report with some interesting information about the positive rebound in movie theatre traffic and revenue.

What's more interesting is that AMC's short interest remains rather high and now institutions are buying up the stock left and right.

Could this be the beginning of another epic short squeeze in 2022?

AMC's Strong Q1 2022 Results

AMC posted $785.7 million in Q1 2022 revenue (Up 529% YoY) while net losses hit $337.4 million (Up 229% YoY). Adjusted EBITDA improved by $233 million to a loss of $61.7 million (Up 79.1%).

AMC Q1 2022 metrics

AMC Q1 2022 Results (amctheatres.com)

Overall theater attendance exceeded 39 million viewers during the quarter, while the average number of screens reached over 10 million.

AMC released several key movies to start the year including:

  • Spiderman: No Way Home
  • The Batman
  • Sonic The Hedgehog 2
  • and most recently Dr. Strange in the Multiverse of Madness

The company has a strong catalog of movie releases throughout the rest of 2022 including:

  • Top Gun Maverick
  • Jurassic World Dominion
  • Lightyear
  • Thor: Love and Thunder
  • Minions: The Rise of Gru
  • Black Panther: Wakanda Forever
  • and the highly anticipated Avatar 2

It looks like AMC has survived the toughest periods of the pandemic and could exceed Wall Street's expectations with such an impressive catalog of future releases coming up.

Also, the company has made several key changes by accepting cryptocurrencies such as Bitcoin, acquiring 10 new theatres in key markets, investing $28 million in Hycroft Mining (HYMC) and most recently purchasing a 6.8% stake in National Cinemedia (NCMI).

AMC's impressive performance has caught the attention of several high-profile Wall Street institutions, who have either opened a new position in AMC stock or increased their stake.

Ray Dialio's Bridgewater Capital purchased 21,700 AMC shares in Q1 2022 while the hedge fund sold its stake in Tesla (TSLA).

According to Fintel, Goldman Sachs (GS) increased its stake in AMC by 36%, to just over 3 million shares on May 16th. Lots of institutional investors have bought AMC stock over the last few weeks, which could trigger an epic short squeeze leading up to Summer 2022.

High Short Interest Could Cause Another Short Squeeze

AMC is a prime candidate for another potential short squeeze due to its high short interest and number of shares on loan.

According to Ortex, AMC has a 21% short interest with 150 million shares on loan. Short-sellers borrow shares and then sell them to cause the price of a security to fall in price. Their goal is to buy back the shares at a cheaper price to pocket the difference.

However, it appears as though institutions and retail investors noticed the high short interest and started buying AMC stock at around $10 per share.

Chart
Data by YCharts

These short-sellers must return their shares by buying back the stock, which could cause the price to soar in a hurry.

Risk Factors

It's unlikely that AMC stock will squeeze at such an aggressive pace this time around because retail stock market trading activity is much longer in 2022 when compared to last year.

Markets are down from the November 2021 highs, and many investors have either gotten out of the markets or panic sold their stocks at lower prices.

I don't expect AMC shares to reach $60 again, but I believe $30 is a strong possibility over the next couple of weeks. At current market prices, AMC stock could 2x or 3x from here, providing even larger gains for call option buyers.

Another risk factor is that the stock market hasn't bottomed yet, and future Fed rate hikes could send stocks plummeting lower. I do believe much of this is already priced, plus billionaires are buying stocks at these current price levels.

Would billionaires start buying stocks aggressively if they believed prices would crash even lower? My guess is absolutely not.

Conclusion

AMC stock is one of my favorite meme stocks to trade because you can make quick gains in a hurry. Gamestop is another short squeeze candidate, but GME stock trades around $100, making it more expensive to buy long shares and call options.

If you're looking for some quick profits during the current market reversal, then I believe AMC stock is worth a serious look.

This article was written by

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Investor Trip is a global investment community that focuses on hypergrowth assets like growth stocks and cryptocurrency. Our investment strategy is to identify sectors with massive growth potential then pick the biggest & best companies that will become future winners. We discuss both US & international stocks as well as high performing assets such as Bitcoin. Follow us to receive notifications whenever a new article is published.
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Disclosure: I/we have a beneficial long position in the shares of AMC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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