Why AMC Stock Is Down By 11% Today

AMC Stock Gained Strong Downside Momentum Despite Successful Weekend

Shares of AMC Entertainment gained strong downside momentum after the stock managed to settle below the 50 EMA at $39.65.

There were no near-term negative catalysts for the move. In fact, AMC has recently reported that it had roughly 3.2 million customers globally from Thursday through Sunday. This was the busiest weekend since the beginning of the pandemic.

The release of the Black Widow boosted viewership but failed to support the company’s shares as the market began to focus on valuation. The stock, which traded near the $2 level before it become one of the favorite stocks on social media, needs constant inflow of new money from retail investors as its valuation remains detached from reality. In addition, recent data suggests that short interest is rising again, which may put more pressure on the stock.

What’s Next For AMC Stock?

Analysts expect that AMC will report a loss of $3.16 per share in 2021 and a loss of $0.81 per share in 2022. Analyst estimates for 2023 project that the company will not be able to return to profitability.

As the stock remains fundamentally overvalued despite the significant correction which took it from the $70 level to the $35 level, its near-term performance will depend on whether it is able to attract more retail investors.

I’d note that momentum is very important for “meme stocks” as many retail traders look ready to jump into the hot stock of the day in search of quick profits. Once the stock loses momentum, the market begins to pay more attention to the company’s fundamentals, which is bearish for “meme stocks” whose valuation depends on popularity rather than financial results.

In this light, the recent move below the 50 EMA is a worrisome development for AMC bulls. This move may attract more short sellers, and the stock should have a decent chance to gain additional downside momentum in the upcoming trading sessions.

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