AMC Entertainment Holdings (NYSE: AMC) has a run almost as well as GameStop (NYSE: GME), with the cinema operator’s shares up 277% last week (compared to a 325% gain for GameStop). But one analyst says it all ends badly because AMC isn’t worth more than $ 1 a share.
MKM Partners analyst Eric Handler downgraded its stock to sell from neutral today and set a price target of just a dollar per share, about 92% lower than where it closed last Friday. However, the stock was up 6% today as of 10:45 a.m. EST.
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Unsurprisingly, Wall Street has such a bad view of the world’s largest theater operator. The boom in AMC’s stock is not based on the underlying fundamentals of its company, but rather on a short squeeze designed to hurt short sellers as much as possible.
Born from the same momentum that drove GameStop higher, traders on Reddit noted that the theater operator’s stock had gone heavily short, meaning investors were betting that the stock price would fall. At one point, about 80% of the shares available for trading were sold short. Just like they did with the video game retail industry, Reddit traders piled into the stocks and bought stocks and options contracts that forced the stock price to rise and weighed on the shorts.
Brokers responded by restricting or preventing investors from trading on these volatile issues, and while most buying bans were reversed, the popular mobile trading platform Robinhood just announced that it would put limits on the number of shares and options contracts investors could buy.
While it limits GameStop investors to just one share and five contracts in total, AMC traders can only buy 10 shares and 10 options contracts.
The theater chain raised nearly $ 1 billion in new funding last week, which could allow it to survive at least through 2021, also suggesting that its stock may be worth more than $ 1 – although perhaps not much more.