AMC stock (AMC) - Get AMC Entertainment Holdings Inc. Class A Report has been zipping higher, and the gains have only accelerated in the past few hours. Shares of the movie theater company were up 16% as of the writing of this sentence, on March 23, even though the S&P 500 traded lower for the day.
Hoping to push AMC back to the stratospheric levels seen in the earlier part of 2021, shareholders must be excited about the possibility of a moonshot. Is there a substantial rally on the horizon for AMC stock?
(Read more from Wall Street Memes: GameStop Stock Up Strongly: It Could Be Heading To The Moon)
What's driving AMC stock higher
Since early last year, AMC stock has been mostly trading independently of business fundamentals. Increased popularity among retail investors looking to bet against short sellers and produce massive short squeezes can be credited for outstanding gains in 2021.
More recently, AMC stock seems to have been nudged by company-specific news as well. For instance: since March 15, after AMC announced the acquisition of nearly one-fourth of gold and silver miner Hycroft Mining (HYMC), AMC stock has risen more than 30%.
As roughly 90% of AMC's float belongs to retail investors, according to CEO Adam Aron himself, the stock is highly sensitive to the sentiment of its individual stockholders. The announcement of the recent AMC acquisition probably helped to rally AMC investors – a.k.a apes – once again.
That said, the broad market’s risk-on attitude of the past several days may have also played an important role. In fact, we think that this is a key reason behind AMC stock’s recent jump.
Moving the market at large, among other factors involving geopolitical stress, is the shift in monetary policy. Last Wednesday, the Fed approved the first interest rate hike in three years and unveiled six more to come.
The announcement could have hurt the stock market, but it served as a bullish catalyst instead. The S&P 500 rose almost 8% in the few days following the Fed meeting.
Investors are probably seeing the measures taken by the US central bank as the right move to combat record-high inflation. Quant Data CEO Andrew Hiesinger commented to Fortune:
"Usually, the stock market is reflecting what's best for the economy. So if interest rate hikes are best for the economy, then stocks will respond to that"
What's next for AMC shares?
AMC shares remain more than 70% below their historical peak of June 2021. But this is not to say that “meme mania” is dead.
AMC stock is still a favorite target of the bears, as short interest has reached almost 20% of the float, according to Yahoo Finance. For as long as this number stays elevated, the possibility of future short squeezes is certainly on the table.
Regarding fundamentals, as observed during AMC’s Q4 earnings call, things are starting to look much better. For the first time since the beginning of the pandemic, AMC can focus much more on recovery and growth, and worry less about the survival of the business.
Evidence can be found in the company’s initiatives. From the acquisition of Hycroft to investments in the theaters' infrastructure, the marketing of branded popcorn and even the launch of a digital coin, AMC has been looking towards the future, not the past.
But in the end, an eventual trip to the moon will depend much more on the apes continuing their support of AMC shares through optimism and enthusiasm, and less on business fundamentals. At least judging by recent stock price action, investors seem engaged and excited to possibly witness “the mother of all the short squeezes” (a.k.a. MOASS) this year.
(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)