The American entertainment company AMC is especially known for the short squeeze by Reddit users last year and is often mentioned in the same breath as Gamestop. The stock, which was still at $2.00 in January 2021, rose almost to $73.00 in mid-2021, making it one of the biggest mistrades by short sellers of this stock in 2021. However, this share price explosion is not justified by the company’s figures: These show a very high debt of almost 11 billion US dollars for the company damaged by the Corona pandemic. In addition, the company has been loss-making for several years and most recently reported an operating cash flow of almost -$600 million.
While the current economic situation does not make another short squeeze of the stock impossible in my opinion, it does make it less likely. Debt-ridden and unprofitable companies will be hit first by the recession with the current bear market. The fact that AMC only narrowly escaped bankruptcy in 2021 and that the industry has not really improved since then points to the group’s problematic situation. Slow industry growth and high competition from Netflix, Amazon Prime Video and other major streaming providers could soon be AMC’s undoing.
Chart-wise, AMC stock is currently recovering from a downtrend low and appears to be forming a bear flag. In the process, resistance is forming on the upside at around $15.00. Those looking to open a short position despite the aforementioned risk of a short squeeze in Meme stock could hope for a slight correction to $13.00. This could be followed by a breakout to the downside. However, if the price cracks the $16.00 mark, we could see new rises to the downtrend line currently at $20.00.