Down by more than 23% in the past five trading days, what could be going on with AMC stock AMC? You can lay the blame on marketwide volatility.
Between the Covid-19 Omicron variant and talk of the Federal Reserve taking away the “easy money” punch bowl, investors have been running scared since Thanksgiving.
This fearful sentiment has trickled down to the meme stock community active in this stock. Even some of AMC’s self-described “Apes” are cashing out of the movie theatre chain’s shares.
But will the “Apes” continue to bail, as stocks could remain volatile over the next few weeks? Or, will AMC stock instead bounce back? Let’s dive in, and break down both possible outcomes.
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AMC Stock and Why The Meme Crowd Started to Panic
Several negatives, including a mixed earnings report and reports of heavy insider selling, did little to shake “Ape” confidence in AMC during most of last month.
At the time, the resiliency made sense. After all, this crowd has typically laughed all the way to the bank defying Wall Street conventions by buying this stock — despite the wobbly fundamentals and questionable recovery prospects.
However, this flew out the window when Omicron and the Fed’s latest comments called into question the wisdom of “buying the dip” and carrying on. With this, it’s no surprise that AMC stock has fallen from above $40 per share to around $29 per share midday on December 6.
Why AMC Could Fall Further From Here
Right now, it may seem like further declines lie ahead for shares in this movie theater chain. The overall stock market is still trending sideways at best, if not lower.
It’s still too early to say whether Omicron will bring an end to the Covid-19 recovery. The Federal Reserve, after taking a dovish stance on fiscal policy since the start of the pandemic, could become much more hawkish in 2022, due to issues with inflation.
As these factors continue to dominate financial headlines, markets could stay volatile. In theory, this points to more pressure on AMC stock, and a move back toward prior lows.
Why Meme Madness Could Still Prevail
Market trends point to AMC stock continuing to decline in price. However, there’s still a factor at play that could convince many “Apes” to charge back into shares: its moderately high levels of short interest.
According to Fintel.io, short interest stands at around 17.1% of outstanding float. With this, there's still the hope of a “mother of all short squeezes,” or MOASS, scenario playing out.
In fact, with its recent weakness, Wall Street short-sellers may smell blood in the water, and feel safe about crowding the short side once again. If this happens, the Reddit “Apes” could retaliate and coordinate another short squeeze.
Given the uncertainty looming over the markets, it may seem to some like AMC’s days as a hot meme stock are numbered.
At the same time, it may be short-sighted to say that the “Ape Army” is ready to give up on one of their favorite meme stocks. If its short interest starts to creep up again, and if it remains popular on Reddit and other platforms, AMC stock could recover from its recent Omicron and Fed-driven drop.
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)