The WallStreetBets Reddit army might be at it again – as the AMC Entertainment Holdings Inc (NYSE: AMC) stock soared 95% overnight. Not too long ago this theatre chain company was being written off due to the impacts of COVID-19. Well, the company’s shares have now gained 1,047% in the last night after last night’s gain.
But what’s the story behind this theatre chain’s rise from the ashes? And what are commentators anticipating next?
AMC stock caught in the middle
When it all boils down, the main thrust of AMC’s meteoric rally is the war between Wall Street and Main Street. In other words, retail investors decided to act against the big hedge funds.
GameStop Corp. (NYSE: GME) was the frontrunner of a campaign against hedge funds, which were shorting companies into oblivion. Earlier in the year retail investors applied a buy and hold approach, which pushed the share price of GameStop higher. The rise in share price led to a few hedge funds making substantial losses on their short positions.
At the time, AMC was another US company that was receiving the same boost from retail investors. Unlike GameStop, AMC has gone on to surpass its January/February share price highs.
It appears the retail love has shifted more towards AMC than GameStop. Sentiment data for WallStreetBets over the last 24 hours corroborates this hypothesis. Reportedly, AMC was mentioned 9,130 times with 83% of the comments being positive towards the stock. Whereas, GameStop has received 2,280 mentions with 85% positive sentiment – according to Swaggy Stocks.
Where to from here?
Host of Mad Money, Jim Cramer believes the AMC share price is well into overvalued territory. Furthermore, Cramer thinks the theatre chain will face intensifying competition from the home streaming market as well as from the impact of COVID restrictions.
Commenting on the skyrocketing price of AMC shares, Cramer said:
AMC is fascinating, but now, at $22 billion, with 300 million shares traded out of a float of 500 million, it’s obvious that this is a stock where the sellers have just had to go away. The meme people have two stocks, they have GameStop and they have AMC, and they have nothing else frankly.
Like a cup of water on a raging fire, Cramer’s comments have failed to extinguish the meme stock’s momentum. In after-hours trade, the AMC stock is up a further 8.7% to US$68 a share. The company’s market capitalisation is now US$28.16 billion.