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• AMC Entertainment's share price has moved sideways in the past few weeks.
• The stock has crashed by over 98% from its highest point on record.
• The company has continually diluted its existing shareholders.

AMC Entertainment’s (NYSE: AMC) stock price has gone sideways in the past two months as investors assess the health of the company. The shares were trading at $7 this week, where it has been since September. It has plunged by 90% in the past 12 months and by 80% in 2023 alone.
 

AMC has been a value destroyer

AMC Entertainment, the biggest movie theatre in the US, has been a major value destroyer in the past few years. Its stock has crashed by over 98% from its highest point during the Covid-19 pandemic. 

At the same time, the number of outstanding shares has skyrocketed as the company has diluted its investors. Total shares have surged to over 198 million, according to TradingView. There were only 58 million outstanding shares in 2022.

AMC had another equity raise recently when it filed to raise $350 million to boost its balance sheet. It sold 30 million shares at $10 each, meaning that the total outstanding shares have jumped to over 208 million.

The new capital raise means that the company now has over $1 billion in cash and equivalents. This cash is against total long-term debt of over $4.7 billion. This means that the firm can easily pay its debts since it only has $20 million in short-term debt. Its interest expense in the last quarter stood at $94 million.

The most recent results show that AMC Entertainment revenues jumped sharply because of the Barbie and Oppenheimer movies. This revenue jumped by 41% to $1.41 billion, higher than the expected $1.5 billion. 

Revenues rose even as the number of visitors dropped during the quarter. The company compensated for this by hiking prices by about 30%. Total patrons during the quarter were over 73.6 million people. 

AMC Entertainment faces challenges ahead. The biggest one is that the hype of Barbie and Oppenheimer has now died and cinema attendance has plateaued. This means that the company’s revenues will be much lower than in Q3. Analysts believe that its revenue will be $1 billion this quarter while its EPS will be a loss of 39 cents.
 

Is AMC a good stock to buy?

(Click on image to enlarge)

AMC chart by TradingView

Turning to the weekly chart, we see that the AMC share price has been in a steep sell-off in the past few months. As a result, it has remained below the 50-day and 100-day moving averages, signaling that bears are still in control.

A closer look shows that AMC stock has formed a falling wedge pattern, which is one of the most bullish signs. Volume has been above average since September.

Therefore, while the fundamental situation looks bad, a bullish breakout cannot be ruled out. If this happens, the stock will likely bounce back to about $10. The alternative scenario is where the shares continue falling and become a penny stock.

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