Market analysts warn against meme-stock ‘gambling,’ as AMC’s stock price remains decoupled from fundamentals

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  • Market analysts said it’s hard to predict when surges in AMC’s stock price will come to a halt.
  • “It is anyone’s guess how much larger this bubble can grow,” one analyst said.
  • AMC shares whipsawed Thursday after a record surge Wednesday that nearly doubled the stock price.
  • See more stories on Insider’s business page.

The rally in shares of AMC Entertainment, fueled by an army of retail traders, could be at an end – or not.

The world’s largest movie theater chain nearly doubled in value in a single day of trading Wednesday, adding to gains from the day and week prior, as retail investors – pooled together on sites like Reddit and Twitter – poured into the stock.

The price then whipsawed from red to green to red again Thursday after AMC announced a share sale, which initially caused the stock to plummet. The decline, one analyst said, was “to be expected.”

“The bigger it goes, the farther it’s going to fall,” said David Trainer, chief executive officer of investment research firm New Constructs.

Market analysts weighed in Thursday on the unprecedented gains in AMC that helped drive a rally in a group of meme stocks this week. The analysts said the surge in AMC’s stock price was detached from the reality of the company’s value, but when that rally will come to a halt is a gamble.

“The retail force behind this movement is still strong, so it is anyone’s guess how much larger this bubble can grow,” said Edward Moya, senior market analyst at OANDA.

Meme stock trading, he said, “is just gambling. You could easily see this come crashing in minutes time.”

Trying to apply logic to AMC’s share price is “futile,” said David Jones, chief market strategist at European trading and investing platform Capital.com.

“Who knows when the music stops?” he said. “Just don’t expect to be able to call the top in this one. We may have already seen it, but then again perhaps it doubles in price once more.”

The current trading enviornment can’t last forever, Moya said, predicting that meme stocks such as AMC would give up a lot of their gains by the end of the week.

Some retail-trader favorites have already begun to erase gains made earlier in the week. Bed Bath & Beyond, GameStop, and Beyond Meat all declined Thursday. But some meme stocks, like Tilray, BlackBerry, and Workhorse continued increasing in value.

AMC’s actual value, the analysts said, is far detached from where it’s trading.

“It’s hard to justify an equity valuation above $0,” Trainer said, citing the company’s debt load, weak earnings, and share dilution.

Moya said the stock price will likely settle below the $20 mark it surpassed last week. “The overall fundamentals are really going to hamper this stock,” he said.

But, the analysts said, the retail traders don’t care about the fundamentals of the company, which has flirted with bankruptcy in the past and struggled amid the COVID-19 pandemic as movie theaters shuttered and people opted to stay at home to watch new films.

“They call each other ‘apes.'” Trainer said. “They flaunt the fact that they don’t care about fundamentals.”

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Meme stocks whipsaw as AMC share sale ends massive Reddit-fueled rally

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In this photo illustration a Reddit logo seen displayed on a smartphone.

  • Meme stocks largely retreated Thursday, with AMC, GameStop, and Bed Bath & Beyond all falling.
  • Some retail favorites, like Tilray, Clover Health, and Virgin Galactic continued to rally, though.
  • AMC dropped as much as 40% after announcing plans to sell nearly 12 million new shares.
  • See more stories on Insider’s business page.

A handful meme stocks held onto strong Thursday while others, including AMC Entertainment, GameStop, and Bed Bath & Beyond retreated.

BlackBerry led gains among meme stock Thursday before turning downward along with other well-known names. The stock, which fell as much as 8%, was the top conversation piece among retail-trader favorites on Wall Street Bets with AMC and GameStop behind it, according to data from Quiver Quantitative.

AMC, which nearly doubled in price yesterday, fell as much as 40% after the company announced a 12-million share sale. Trading halted three times for the stock amid the sharp decline.

Other meme stocks that have rallied this week fell with it. Bed Bath & Beyond dropped as much as 27% after its 63% one-day rally Wednesday. And the original meme stock, GameStop, retreated as much as 13%.

Beyond Meat, a new meme stock pushed by Mad Money’s Jim Cramer, also fell along with Koss Corp.

But not all of the retail-trader favorites declined.

Canadian cannabis companies Tilray and Sundial both rallied despite the meme-stock losses. Tilray, which recently completed its acquisition of Aphria, jumped as high as 16% Thursday, as Sundial rose 33%, putting both stocks on a two-day rally.

The two companies have benefited from positive sentiment from retail traders after Amazon announced it would back a federal bill to legalize marijuana. They were among the “most discussed” stocks on Wall Street Bets, Quiver Quantitative said.

Some other lesser-known meme stocks rallied alongside Tilray and Sundial, as well. Workhorse, the Ohio-based seller of electric vehicles and aircraft, jumped as much as 54%. Clover Health, the health insurer backed by Chamath Palihapitiya, jumped as much as 13% before paring gains, and space tourism company Virgin Galactic rose as much as 8%.

If you’re a Millennial or Gen Z investor willing to share your investing experience, reach out to the reporter of this article at ndailey@insider.com.

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AMC short-sellers just lost $2.8 billion in a single day – and they’re now down $4.5 billion in 8 days amid a 500% surge for the stock

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  • AMC short-sellers lost $2.8 billion on Wednesday alone as shares skyrocketed as much as 127%
  • They’re now down $4.5 billion in just eight days, since AMC shares began a torrid surge that capped out at more than 500% on Wednesday afternoon.
  • AMC shares have benefited from renewed interest from Reddit day traders seeking to squeeze out short positions.
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Short-sellers betting against AMC stock lost $2.8 billion on Wednesday alone as shares skyrocketed as much as 127%. They’re now down $4.5 billion in just eight days, since AMC shares began a torrid surge that capped out at more than 500% on Wednesday afternoon, according to data from analytics firm Ortex.

AMC slid 3% to $60.47 on Thursday as of 9 a.m. in New York.

Short-sellers felt the pain in other meme stocks as well as Reddit day traders banded together to execute squeezes of bearish positions. Shares in home retailer Bed Bath & Beyond rallied 62%, adding up to $681 million in losses, while retail chain GameStop’s stock rose 13%, delivering $414 million in losses, according to Ortex.

It’s activity reminiscent of the GameStop mania that dominated market activity in late January and early February, and the market’s most heavily shorted stocks – including AMC – are once again in focus. Mark-to-market losses from the 10 most-shorted US stocks totaled $4.5 billion just on Wednesday, Ortex data shows.

Yet despite the deep losses, short-sellers appear relatively unperturbed. The percentage of AMC’s free float held short had actually increased to 18% on Wednesday, up from 15.5% a week prior, according to Ortex. Further, data from Bloomberg showed that shorts only slightly pared their positions on Wednesday as AMC’s wild spike was transpiring.

“If you, as an investor, believe the share price will go back to where it was at the beginning of the year, shorting the stock [now] could bring huge profits,” Ortext cofounder Peter Hillerberg told Insider.

He continued: “However, so far, the short bets haven’t paid off, as the upward momentum in AMC has been going for a few days now and seems to only be increasing.”

Read more: Morgan Stanley identifies 28 underappreciated, high-quality stocks to own as the market’s most expensive names are due to continue underperforming

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AMC surges 126% as Reddit cheerleaders overpower large hedge-fund share sale

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  • Shares of AMC Entertainment surged as much as 126% on Wednesday before trading was halted for volatility.
  • The move comes after hedge fund Mudrick Capital dumped shares on the same day it was disclosed the firm bought 8.5 million units.
  • Retail traders on sites like Reddit remained bullish on the meme stock.
  • See more stories on Insider’s business page.

AMC Entertainment surged Wednesday despite a share dump from hedge fund Mudrick Capital.

Shares of the world’s largest movie theater operator jumped as much as 126% to trade around $72, triggering a halt for volatility. The surge built on Tuesday’s gains, which pushed the stock 23% higher during the session to close at $32.04. AMC shares have now spiked almost 500% in just seven trading days.

The Leawood, Kansas-based company announced Tuesday it raised $230.5 million in cash after agreeing to sell 8.5 million shares to Mudrick Capital for $27.12 each, a dollar higher than the stock’s Friday closing price. Shares surged following the news as the company said it would use the funds to make acquisitions, improve consumer appeal, and deleveraging.

Just hours after the announcement, Mudrick Capital sold its entire stake at a profit, Bloomberg reported. Despite the share dump, the meme stock continued its rally early Wednesday as retail traders remained bullish. The stock remained one of the top talked-about companies on Reddit threads like Wall Street Bets, HypeEquity data showed.

AMC has led a broader rally in meme stocks, like GameStop and BlackBerry, so far this week amid renewed interest in the retail-trader favorites. BlackBerry, for its part, closed 15% higher at $11.56 Tuesday and continued rallying in early morning trading, as GameStop closed 12% higher at $27.02 Tuesday and upticked just slightly Wednesday.

Last week, shares of the movie theater operator rallied for days after private Chinese conglomerate Dalian Wanda Group announced it sold nearly all of its remaining stake in the company. Retail traders cheered the newly available shares, more than doubling the stock price through the course of the week.

Retail traders have invested in heavily shorted stocks like AMC and GameStop, in an effort to squeeze short sellers, who have lost billions on their bets. But shorts haven’t given up as short interest in the stocks is 21%, according to MarketBeat data.

If you’re a Millennial or Gen Z investor willing to share your investing experience, reach out to the reporter of this article at ndailey@insider.com.

Read more: Morgan Stanley identifies 28 underappreciated, high-quality stocks to own as the market’s most expensive names are due to continue underperforming

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Retail traders driving the meme stock frenzy are ‘here to stay’ but the AMC rally isn’t going to end well, former E*Trade CEO says

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  • Retail traders driving up meme stocks have “staying power,” said the former CEO of E*Trade.
  • These investors have powerful tools at their disposal, including social media and trading apps, he said.
  • When his own son asks about mem stocks and dogecoin, he says it’s all about fundamentals.
  • See more stories on Insider’s business page.

The retail traders driving the meme stock frenzy are “here to stay,” but the current rally in shares of AMC Entertainment is not, said Karl Roessner, the former chief executive officer of E*Trade, in an interview with CNBC.

“This is not going to end well,” Roessner said of the AMC rally. “I think historically we we’ve seen this in the past, but I do believe this group has staying power.”

Shares of AMC jumped as much as 27% Monday following a record week in the stock that was largely driven by retail traders on Twitter and Reddit.

AMC, the world’s largest movie theater chain operator, became part of a new trend of so-called “meme stocks” earlier this year when retail investors on Reddit threads, most notably Wall Street Bets, began pouring into certain stocks like GameStop in order to squeeze short sellers.

Wall Street Bets since has ballooned into an army of retail traders numbering more than 10 million users.

In the interview with CNBC, Roessner, who is now the CEO of Lefteris Acquisition Corp., said with the availability of social media and trading platforms, the group has “powerful tools” at their fingertips, giving them “staying power.” Apps like Robinhood, WeBull, and Public, have grown in size amid interest from new investors.

He said his own sons, who both have E*Trade accounts, have picked up on investing.

“They keep hitting me as to, ‘Why don’t we own any dogecoin, or why don’t we get involved with one of these meme stocks?’ And I always bring it back to fundamentals,” he told CNBC. “Then they hear from their friends that they just made $10,000 on dogecoin, and they’re going to take the rest of the summer off. So how do you combat that?”

He said educating in financial literacy is key. For example, all of the money retail traders are investing in hyped up stocks should be risk capital, he said, because there’s a chance a person could “lose everything.”

“I always worry about the last retail trader who’s left holding the bag when the music stops,” he said, noting the last retail traders to invest during the internet bubble or before the market crash that prompted the Great Recession.

With regard to AMC specifically, Roessner said he applauds management raising capital to address balance sheet problems. But overall, “Absent some serious strategic undertakings by that company, it’s still just not worth what it’s trading for right now.”

If you’re a Millennial or Gen Z investor willing to share your investing experience, reach out to the reporter of this article at ndailey@insider.com.

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BlackBerry jumps 10% as Reddit traders seek another short squeeze mere days after sending AMC soaring

A shareholder uses his Blackberry while waiting for the Research In Motion annual meeting to begin in Waterloo, July 17, 2007.
BlackBerry shareholder

  • BlackBerry shares rallied 10% in pre-market trading as some Redditors sought a new short squeeze.
  • The company jumped last week as well amid a broader meme-stock rally driven by retail traders.
  • Some Redditors mentioned a $20 share price target for the stock, double its current value.
  • See more stories on Insider’s business page.

Shares of BlackBerry jumped 10% in pre-market trading Tuesday as Redditors sought a short squeeze in the stock.

About a tenth of all conversations among Redditors hoped for a short squeeze, and another 1% called for a $20 price target, according to HypeEquity data. That would nearly double the share price from Friday’s close of $10.07.

Shares of BlackBerry, the legacy telecom company that is now focused on cybersecurity, rose last week as well – jumping 16.8% – amid a broader meme stock rally largely driven by retail traders.

AMC Entertainment, the world’s largest movie theater chain, led last week’s meme stock rally, more than doubling in price and closing out the week at $26.12 – its highest in years – as it trended on Twitter hashtags and among retail investors on Reddit. Other meme stocks, such as GameStop, Virgin Galactic, and a new one, Beyond Meat, also rallied last week amid renewed interest from retail traders.

Shares of AMC rose again in pre-market trading Tuesday, but some Redditors seemed ready to move onto the next short squeeze, as BlackBerry was the most popular stock stock on the site.

One Redditor, with a long post history and a lot of “karma” on the site, said, “It’s not worth buying AMC anymore, that train already passed,” and added that, “even BB is a safer choice now, since BB is actually undervalued.”

Ontario, Canada-based BlackBerry joined the meme stock trend back in January, when- in retail traders on social media sites such as Reddit picked what they deemed to be undervalued companies and poured into them in an effort to squeeze short sellers. Shares skyrocketed to $25, before declining in the following months.

Short interest in BlackBerry is 9%, according to MarketBeat data, compared to other meme stocks AMC and GameStop, which have a 21% short interest.

If you’re a Millennial or Gen Z investor willing to share your investing experience, reach out to the reporter of this article at ndailey@insider.com.

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US stocks climb to end the week higher as recovery optimism grows

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Deutsche Bank said retail investors have been key players in the stock market rally

US stocks closed higher on the last trading day of the week as optimism around the pace of economic recovery continues to grow.

“For now, the market is looking through these high readings and shares the Fed’s views that inflation is transitory,” Cliff Hodge, Cornerstone Wealth CIO, wrote in a statement. “We’ll likely have at least two more lofty prints before settling back down.”

Hodge said the “true gut check” will come in July and August when the country has gotten past the worst of the pandemic. This, he said, is when the window of risk for the markets really opens up.

“If inflation proves to be more sticky and we get a taper announcement that could be a double whammy for stocks,’ he added.

The Personal Consumption Expenditures price index – a key measure of domestic inflation – gained 0.6% in April, the Commerce Department announced Friday, as American spending rebounded.

The jump is the largest single-month gain since 2008, in line with the median estimate of a 0.6% increase from economists surveyed by Bloomberg.

The PCE index also notched a 3.6% year-over-year gain, surpassing the median estimate of 3.5%

“This report puts the Fed in a really good place, inflation is up, but real yields are still low,” Jamie Cox, managing partner for Harris Financial Group, said in a statement. “This is basically a transitory sweet spot.”

Here’s where US indexes stood shortly at the 4:00 p.m. ET close on Friday:

GameStop continued its rally amid a meme-stock resurgence with shares rising as much as 5.39%. In the past month alone, shares of GameStop are up nearly 50%, while fellow Reddit darling AMC has seen an incredible rise of nearly 200% over the same period.

AMC short-sellers, in fact, aren’t letting up. Instead, they’re digging in further. A week ago, the number of AMC shares on loan, used to short the stock, was 124 million. As of Friday, the number of shares on loan was 132 million, new data from ORTEX shows.

In the digital asset space, South Korea is moving forward with plans to impose a 20% income tax on capital gains from cryptocurrency transactions, according to a report. Starting next year, these will be classified as “miscellaneous income” and must be reported when filing for general income taxes in May 2023.

Meanwhile, the newly launched Crypto Council for Innovation, an industry group that includes heavyweights such as Square, Fidelity, Coinbase, and Paradigm, is looking for a new boss, DealBook first reported Friday. The news of CCI’s hunt for new leadership comes as authorities are mulling ways to increase oversight of crypto.

Oil prices were mixed. West Texas Intermediate crude fell by 0.61%, to $66.44 per barrel. Brent crude, oil’s international benchmark, rose 0.27%, to $69.65 per barrel.

Gold fell as much as 0.23%%, to $1,902.19 per ounce.

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GameStop’s latest rally has pushed shares up roughly 50% in the past month amid a new meme-stock boom

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  • Meme stocks are experiencing a resurgence, with shares of GameStop rising roughly 50% in the past month.
  • The rise can be partially attributed to a short-squeeze as the company’s short interest remains elevated at 20%.
  • Shares of Gamestop have risen more than 1,200% since December 31, 2020.
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GameStop stock continued its rally on Friday amid a meme-stock resurgence with shares rising as much as 5.39%.

In the past month alone, shares of GameStop are up nearly 50%, while fellow Reddit darling AMC has seen an incredible rise of nearly 200% over the same period.

The jump in share price can be at least partially attributed to a short-squeeze as 20.27% of outstanding shares are currently sold short, according to data from S3 Partners managing director of predictive analytics, Ihor Dusaniwsky.

GameStop shares were also buoyed by the company’s recent announcement that it is building a non-fungible token (NFT) platform based on the ethereum blockchain.

The meme-stock resurgence has put short sellers in some serious trouble. On Tuesday alone, short sellers in AMC and GameStop lost $618 million, according to data from ORTEX.

GameStop stock is up more than 1200% since December 31, 2020, and the company has capitalized on the move.

The video game retailer raised more than $550 million via an at-the-market share offering, paid down debts, and implemented a turnaround strategy led by Chewy.com co-founder Ryan Cohen.

However, GameStop’s resurgence comes in spite of recently released data that shows videogame sales declined on a year-over-year basis for the first time in 14 months in April, according to NPD Group.

Game Stop also let its former CEO, George Sherman, walk away last month with a $170 million pay-out.

Shares of Gamestop still trade around 45% off of the company’s record-high of $483 per share, reached during the wild late-January short-squeeze.

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AMC surges past $30 Friday amid blistering five-day rally bolstered by Reddit

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NEW YORK, NY – MARCH 15: General view of atmosphere outside the AMC Empire 25 theater on March 15, 2016 in New York City. (Photo by Noam Galai/Getty Images)

  • AMC Entertainment rallied as much as 34% at Friday open, continuing a five-day hot streak.
  • The stock surged past $30, the highest in years.
  • AMC stock price has tripled this week amid renewed hype from retail traders.
  • See more stories on Insider’s business page.

Shares of AMC Entertainment resumed their blistering rally Friday, skyrocketing more than 30% to surge past $30 – the highest price in years.

As of Friday, AMC has been on a five-day hot streak amid hype from retail traders on Twitter and Reddit, causing the stock price to triple since the beginning of the week. The shares reached a high of $36.35 Friday. Short sellers have taken a major hit.

On Twitter, the hashtags #AMCSTRONG, #AMC500K, and #AMCAPES have been trending. Meanwhile, on Reddit’s Wall Street Bets forum, AMC was the most talked-about stock, according to HypeEquity data. Retail traders posted familiar phrases like “diamond hands” and “to the moon” in reference to the stock’s continued rally.

AMC stock gains have caused major losses for short sellers with short interest in the stock at 21%, according to MarketBeat data.

With Thursday’s rally alone, AMC shorts lost more than half a billion dollars, data from market research and data firm ORTEX revealed.

Meme stocks, popularized by retail traders on Wall Street Bets, rallied broadly this week, with gains in GameStop, Virgin Galactic, BlackBerry. and relative new favorite, Beyond Meat, all rising.

The meme stock rally this week has left short sellers with $2.76 billion in losses from GameStop, AMC and Virgin Galactic, ORTEX said.

The rally in AMC shares began early in the week when the company’s once largest shareholder, private Chinese conglomerate Dalian Wanda Group, sold nearly all of the rest of its stake. Redditors cheered the newly available shares, saying the company was now theirs.

Bloomberg reported that the share rally might help AMC pay off its $10 billion in debt, as investors suggest the theater chain should sell more shares to pay down or refinance.

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AMC shares have doubled in just 4 days as Redditors continue to rally behind the meme stock, squeezing shorts in the process

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Movie goers purchase automated tickets at an AMC movie theater in Arcadia, California on August 2, 2017. Frederic J. Brown/AFP via Getty Images

  • AMC stock has doubled in price since the beginning of the week amid renewed interest from Reddit users.
  • The rally began early in the week after Wanda Group sold most of its remaining stake in the company.
  • Short sellers lost $1.77 billion on GameStop, AMC, and Virgin Galactic so far this week, according to data from ORTEX.
  • See more stories on Insider’s business page.

Shares of AMC Entertainment have doubled in price this week as retail traders continue to pour into the stock.

AMC, the world’s largest movie theater chain, is on a four-day hot streak, gaining as much as 102% week-to-date. As share prices rose, so did the number of Reddit comments about AMC, according to HypeEquity data.

On Wall Street Bets, the 10-million member thread best known for starting the GameStop saga earlier this year, Redditors rallied behind the stock, posting the usual rocketship and moon emojis, indicating their view that the stock has a long runway for gains.

One Redditor said, “Get em AMC gooooo.” Another said “AMC to 26 by noon then to the moon,” while others predicted shares would go as high as $30. At 1:20 p.m. ET, shares traded at $24.27.

The AMC rally began earlier this week after Redditors cheered newly available shares on the market, thanks to the company’s once largest shareholder, private Chinese conglomerate Dalian Wanda Group, selling almost all of the remainder of its stake in the company.

Wanda Group bought AMC in 2012 for $2.6 billion and began selling down its stake in December after the company posted a $4.6 billion loss in 2020. Wanda Group’s stake is now just .002%.

Following the news, one Redditor proclaimed, “We now hold the future of this company!”

Meme stocks, like AMC, GameStop, Virgin Galactic, and BlackBerry, have all seen strong gains this week amid positive sentiment about the companies from retail traders on Reddit.

And short sellers have lost a fortune. The latest data from ORTEX shows short sellers lost $1.77 billion on their positions in GameStop, AMC, and Virgin Galactic so far this week.

But short sellers haven’t given up. The data show that short interest in the companies has actually gone up during the week. According to MarketBeat data, short interest in AMC is 21%. Short interest for GameStop, Virgin Galactic, and BlackBerry, is 21%, 24%, and 9%, respectively.

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