AMC Stock Could Be on the Verge of a Bull Market as Earnings Come Out
The curtains may have closed on a Roaring ‘20s feature being played on Wall Street. But in a market made up of stocks, could a bullish sequel be in the works for AMC Entertainment (NYSE:AMC) and AMC stock?
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Today let’s look at AMC off and on the price chart, then offer a risk-adjusted, price of admission that looks attractive in front of tomorrow’s anticipated bullish feature presentation beginning.
As we enter March, the broader market’s overly-bullish action adventure flick of the past two years is at risk of being overrun by enemy bears.
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The venerable Dow Jones Industrial Average is off about 8% year-to-date. The large-cap S&P 500 is off nearly 10%.
But taking the lead, the tech-heavy Nasdaq is down roughly 13% on the year.
Amid Wall Street’s geopolitical-inspired theater, the Nasdaq even signaled a bear market as the worst of the damage cut through the classic bear market 20% line in the sand.
And the bearish storyline hasn’t been lost on cinema chain operator AMC Entertainment. AMC stock is off 33% after being down more than 55% in January. That’s not the worst of it either.
At the moment shares are 74% removed from last June’s all-time-high. And at its most scary, shares of AMC were off nearly 82%.
Not that AMC’s demise has been without cause.
A massive four-fold in dilution, insider selling and broader weak market sentiment over the course of AMC stock’s spiraling decline all conspired against shares to varying degrees.
Of course, there’s AMC’s meme stock base of apes to thank.
Apologies to them, but shares never deserved the $31 billion valuation reached at their most popcorn-worthy moment in June.
Yet as bears take centerstage in many investors’ 401Ks and other savings vehicles, active traders mindful that there’s always a bull market somewhere may want to watch AMC stock for new reasons to buy.
After the closing bell AMC is set to announce its Q4 operating results.
In summary and yardstick comparisons focused on pre-pandemic 2019, analysts are forecasting a small loss of 26 cents on revenues of $1.09 billion.
Whisper estimates, however, expect AMC stock to post even tinier red ink of just 11 cents.
Should sales estimates be met, that would be 25% below 2019’s fourth quarter revenue of $1.45 billion. But there’s reasons to anticipate a beat there too, as well as the theater operator offering a strong outlook.
CEO Adam Aron has led the nation’s largest theater chain out of Covid-19 with even greater market share through ape-friendly NFT favors and free popcorn, as well as regular Joe offerings such as reserved seating, high-margin mobile concession ordering and private theater rentals.
With this year’s movie pipeline filled with big budget action flicks that even drew people off their couches into the theaters during the pandemic, conditions are looking favorable for AMC stock.
AMC Stock Monthly Price Chart
Source: Charts by TradingView
Notwithstanding some red ink, AMC is in a much stronger capital position than it was a year ago. And as discussed above, it’s in position to capitalize on it.
Today, AMC stock is also offering investors an opportunity buy more smartly.
As technical analysis of the monthly chart reveals, AMC’s bear market of the last several months appears close to completing.
In February, while the broader averages were dealing with evil bears, AMC stock gained about 17.5% while putting together an inside doji pattern centered on the 76% retracement level.
Coupled with AMC’s monthly stochastics just entering oversold territory, there’s reason to appreciate that there’s always a bull market somewhere. Sometimes, it’s best to look low for those opportunities.
For bullish investors looking to put modest risk capital to use in front earnings, given the volatile price history and lack of confirmation off and on the price chart, a shorter-term, modestly out-of-the-money bull call spread looks like the right price for admission.
One favored combination to leverage AMC stock’s upside — while vastly reducing downside exposure — is the March $21/$25 call vertical.
On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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