Meme stocks have become ubiquitous in 2021’s stock market. Retail investor favorites, these names have driven outsized gains not because of great fundamentals but often due to a lack thereof. As “stick it to the man” plays, they are mostly underperforming companies often teetering on the edge.
It’s safe to say AMC Entertainment (AMC) has been staring right into the abyss during the pandemic era and only hanging on by the toenails. The retail crowd have sent shares up by 1163% year-to-date, 122% of which have been delivered this week.
Although, to be fair, you could also attribute part of the optimism surrounding AMC to the way it stands to benefit big-time from the reopening. After all, it is the world’s largest movie theater chain and will cater to the pent-up demand amongst avid cinemagoers.
This fact, along with 2 others were behind B. Riley’s Eric Wold’s recent research report. Wold cites “(1) continued global box office reopening and recovery momentum; (2) additional studio windowing agreements demonstrating theatrical exclusivity importance; and (3) successful balance sheet deleveraging moves made by management,” as the reasons why only last month he upgraded AMC’s rating from Neutral to Buy while raising the price target from $13 to $16.
However, in the short duration since, all those expectations have played out and the latest surge has taken the share price beyond Wold’s valuation. And now the share price “largely reflects each of those benefits to AMC's outlook and expected recovery.”
Accordingly, with an “inability to justify taking that PT any higher at this point,” the analyst believes it is time to move over to the sidelines again.
As such, the rating goes back to Neutral, while the price target remains at $16, suggesting downside of ~41% in the year ahead. (To watch Wold’s track record, click here)
Looking at the consensus breakdown, the bears have it. Based on 5 Holds and 3 Sells received in the last three months, the word on the Street is that AMC is a Moderate Sell. At $6.44, the average price target suggests shares will be changing hands at a 76% discount a year from now. (See AMC stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.