Investors who have owned stocks in the past year have generally experienced some big gains. But there is no question some big-name stocks performed better than others along the way.
AMC’s Big Run: One company that has been a great investment in the past year has been movie theater giant AMC Entertainment Holdings Inc (NYSE: AMC).
Unfortunately for long-term AMC investors, the stock and the company were struggling even prior to the COVID-19 pandemic as the entertainment business has undergone a dramatic shift to an over-the-top streaming model. However, AMC experienced a near worst-case scenario in March 2020. The global COVID-19 outbreak shut down all of AMC’s operations. By June, the company announced it had “substantial doubt” it could avoid bankruptcy.
In 2019, AMC generated a net loss of $149.1 million on $5.47 billion in revenue. In 2020, those numbers plummeted to a net loss of $4.59 billion on just $1.24 billion in revenue.
At the beginning of 2020, AMC shares were trading around $7.30. By the beginning of March, the stock had dropped below $6.30 after news of the virus spreading in China prompted concerns about a U.S. pandemic. On March 17, AMC shares dropped all the way down to $1.95 in intraday trading. A day later, the company announced it would be closing all of its theaters for at least six to 12 weeks.
AMC shares recovered to as high as $7.71 in September 2020 amid a broad market rally. The stock ultimately hit its pandemic low of $1.91 in January 2021 as investors looked closer at the growing possibility AMC would never be able to manage its more than $11 billion in debt.
AMC In 2021, Beyond: Fortunately for AMC investors a miracle happened in late January 2021. With AMC on the brink of bankruptcy, Reddit’s WallStreetBets community orchestrated a coordinated buying campaign in the stock as part of a targeted short squeeze effort.
The short squeeze sent the stock skyrocketing from under $2 per share to as high as $20.36 in a matter of days. Since the dust has settled on the initial short squeeze, AMC shares are now back down to the $10.63 level.
AMC investors who bought one year ago and held on were completely bailed out by the short squeeze and have now generated an impressive return on their investment. In fact, $1,000 in AMC stock bought on March 29, 2020 would be worth about $2,931 today.
Looking ahead, analysts are expecting AMC’s fundamentals to bring the stock back down to earth in the next 12 months. The average price target among the seven analysts covering the stock is $2, suggesting 81% downside from current levels.
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