Few companies have a more loyal following than AMC Entertainment (NYSE:AMC). The movie theater chain is consistently one of the most popular stocks among social media communities. Even though AMC stock hasn’t been able to come close to the short squeeze momentum it experienced in 2021 and 2022, loyal investors have still stood by it.
AMC’s fanbase is so loyal, in fact, that commentators like Charles Gasparino have compared it to a cult. Gasparino has cited retail investors’ unfaltering dedication to the stock, no matter how far shares fall.
Now, though, AMC stock is down more than 85% for the past one year. That’s a tough pill to swallow — even for the most loyal of fans.
Recent data from Stocktwits suggests that investors may be starting to lose interest. Tom Bruni, Senior Writer at Stocktwits, sees this decline as a problem for AMC. If the people who have powered shares for years are giving up, AMC stock is losing a major driving force.
Are the ‘Apes’ Abandoning AMC Stock?
The sentiment statistics Bruni cites have been collected via the Stocktwits message boards, which offer readers insight not just on the amount of users posting about a stock but the overall sentiment of their posts. This sentiment can range from extremely bullish to extremely bearish. While AMC stock still earns an “extremely bullish” score, Bruni feels that another metric is particularly important.
What’s the metric? The participation ratio. Per Stocktwits, this “measures the number of unique accounts posting on a stream relative to the number of total messages on that stream.” Bruni notes that, in the case of AMC stock, the participation ratio is relatively low, with the “same group of people” talking about AMC and its shares.
Put another way, when looking at Stocktwits data, AMC’s “core audience” doesn’t appear to be growing. As Bruni told InvestorPlace in an interview:
“I think since there’s primarily been downside momentum in the share price. That group of momentum traders that you would typically see in a short squeeze-type situation has avoided the stock. There hasn’t been any upside momentum to play. […] Until you get a catalyst, until you get something to spark that rally, it’s really just going to be this core group of investors that are sticking with it and talking about it.”
If retail investor interest in AMC stock is waning, it isn’t hard to see why.
CEO Adam Aron has attributed AMC’s recent problems to the recent Hollywood strikes. However, the company’s multiple decisions to issue new stock can also be blamed for plummeting share prices.
AMC stock fell 30% when the company announced plans to sell up to 40 million new shares in September 2023. In December 2023, shares dipped again on news of a 3.34 million share issuance. Bruni sees this shareholder dilution as a key factor when it comes to AMC investors.
“If [AMC is] not making money from their operations, they’ve got to get the money somewhere else […] They’re not going to issue more debt because their cap table’s already chock-full of it […] Now that they have the ability to issue more common shares, that’s the most likely outcome. And so what you’re seeing the market do right now is pricing the expectation for future dilution.”
More Problems for AMC
Achieving profitability as a movie theater chain in 2024 is no easy task, either. The rise of streaming services has offered movie-lovers a quick, easy way to watch new releases without leaving their homes. As The Washington Post reports, one study shows that the number of Americans going on regular cinema outings has fallen 16% since 2017.
This decline is further evidenced by the outperformance of streaming stocks. Netflix (NASDAQ:NFLX) has surged more than 20% so far in 2024. Roku (NASDAQ:ROKU) has risen by a more muted 11% over the same period.
And when people do show up to the theater? Well, it hasn’t done enough for AMC. As Bruni notes:
“If you look at the quarterly earnings results during the period where Barbie and Oppenheimer came out, the company still was not able to achieve a significant level of profitability or revenue. So even with that major tailwind behind it, two blockbuster films that everybody and their mother saw, the company still struggled to be cash-flow positive.”
On top of that, AMC still faces significant debt of $4.8 billion. That also poses challenges, as excessive debt can often hinder a company’s ability to generate meaningful cash flow.
True, the company has been taking steps to reduce its debt burden, including entering multiple debt-for-equity agreements. But these measures just lead to further dilution.
Don’t Expect a Short Squeeze
If retail investors are losing interest in AMC stock, another short squeeze is even less likely. Bruni believes AMC would need a significant positive catalyst to trigger a squeeze, such as a stellar fourth-quarter report.
Even then, though, encouraging quarterly results didn’t do much for AMC in 2023. The company reported positive earnings for Q3 2023 with a net income of $12.3 million. Revenue also grew 45% year-over-year (YOY) to $1.4 billion, beating estimates. In response, shares fell more than 15%. InvestorPlace contributor Rich Duprey accurately summed things up at the time, saying that “AMC stock loses even when it wins.”
With looming debt and a failure to return to pre-pandemic revenue levels, more and more investors have reason to walk away from AMC. As Bruni notes:
“I think the underlying problem for AMC is its profitability. If you look at GameStop, they’re actually running at almost breakeven at this point. So GameStop’s problem is they can’t generate any additional revenue. But at least for right now, they’ve cut enough costs where they can run and break even.”
The Curtains Are Closing on AMC Stock
The combination of mounting industry headwinds and company-specific problems has led to a highly questionable future for AMC stock. Now, the fact that its investor army may be losing interest says just how dire the situation is.
As Bruni notes, the retail investor base behind AMC has done a lot to help shares remain relevant and stave off bankruptcy for now. But even while operations continue, AMC stock’s dismal performance has been discouraging to say the least.
On the date of publication, Samuel O’Brient did not hold (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.