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AMC meme-stock rally 'is just pure hype', analyst says

By James Rogers

This week's meme-stock rally sent shares of AMC and GameStop skyrocketing, fueled by the return of Keith Gill, also known as Roaring Kitty, to social media

The meme-stock rally that sent shares of AMC Entertainment Holdings Inc. skyrocketing earlier this week was driven by hype, not fundamentals, according to Cory Mitchell, an analyst at investing-information website Trading.biz.

"AMC as a company continues to lose money and has for several years," Mitchell said in a statement Wednesday. "While it is possible an orchestrated group of buyers could continue pushing the stock up, someone will be left holding the bag."

Related: AMC's stock tumbles on news company will issue 23.3 million of shares in debt-for-equity swap

"There is always demand for high-quality profitable companies because people want to own those stocks," he said. "This AMC trade is just pure hype."

Lifted by the rally that sent shares of fellow meme-stock darling GameStop Corp. (GME) and others soaring, AMC shares (AMC) ended Monday's session up 78.4% and closed up 32% on Tuesday.

"People are only buying because they believe more people will come in and buy after them, so they can sell at a higher price to those new buyers," Mitchell said. "The stock may go higher in the short term, but unless the company has a massive turnaround, whatever rally develops will be followed by swift and severe selling."

Like GameStop, AMC's stock pared back its gains Wednesday and is down 23.8%. GameStop shares are down 30.1%.

Related: AMC completed sale $250 million of stock Monday after meme-stock rally

On Tuesday the movie-theater chain said it will issue 23.3 million shares in a debt-for-equity swap for $163.9 million in bonds. The bonds mature in 2026, according to a regulatory filing. On Monday, AMC said it had completed a $250 million at-the-market offering of equity capital.

AMC narrowed its loss in the company's first-quarter results last week and outperformed amid the lingering impact of the Hollywood writers and actors strikes, according to Chief Executive Adam Aron.

The company's stock is down 14.9% in 2024, compared with the S&P 500 index's SPX gain of 11.1%.

Ciara Linnane contributed.

-James Rogers

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

 

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05-15-24 1339ET

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