Why is the AMC share price still rising?
Shares in AMC Entertainment Holdings (NYSE: AMC) are again closing in on their all-time high. The cinema operator has jumped 111% in the past 5 sessions alone. At the time of writing, the stock was slightly higher at US$55.05 but is nearing the US$72.62 peak hit earlier this month.
Why investors are upbeat about the AMC share price
AMC has found itself at the centre of a wave of buying by retail investors who have hyped the stock in popular online forums such as Reddit’s WallStreetBets. The phenomenon had sparked a rally in GameStop (NYSE:GME) in January.
AMC had been on the brink of bankruptcy prior to the recent rally, but this month’s surge has boosted its market capitalisation to nearly US$24 billion. AMC took advantage of the price gain by selling its shares at a premium and raising US$587.4 million in additional equity capital.
The gains in its shares are in part driven by optimism about the re-opening of public venues following about 15 months of pandemic-driven shutdowns.
AMC has been the top-traded stock among clients of major US brokerages such as Fidelity and Freetrade, which are mainly used by individual investors who manage their own wealth.
AMC has also benefited from the share rally as its corporate debt has been boosted too, with its June 2026 12% bond soaring 350% this year.
Are the gains sustainable?
Many analysts have questioned the share rally saying it is not in line with the company’s fundamentals.
The gaining popularity of streaming video and games means the US economy’s reopening from coronavirus shutdowns may not boost AMC’s performance dramatically.
Reuters reported that some institutional investors were ramping up options trades on AMC that let them bet the shares will fall while capping on potential losses if they gained instead.
Some Wall Street banks, including Bank of America Corp and Citigroup, have tightened their rules for who can bet against these “meme stocks”, while TD Ameritrade has imposed specific trading limitations on AMC’s shares.
The sharp rally in the stock has got regulators worried with the US Securities and Exchange Commission (SEC) this week warning that it is observing markets and looking for signs of misconduct and manipulation.
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