How to Buy AMC Stock

Do you like to live on the edge?

Maybe we all want a bit of excitement and risk in our lives—especially after we hear stories of how the self-proclaimed ape investors on Reddit outsmarted the big hedge funds and made a fortune short squeezing stocks like GameStop. 🦍

This story took place in early 2021 and it got many people excited about “meme stocks,” the chief of which is AMC due to its fundamentals.

However, this same excitement led some investors to big gains, and many more investors to huge losses—naturally, we all want to be the former. So the question is, is it possible to make a good profit with AMC stock, and how can an investor purchase AMC stock?

In this article, we will take a deep dive into AMC and analyze the potential it holds for investors, while taking its areas of risk into consideration. So, without further ado, let’s take AMC apart, see what it’s made of, and how to invest in it.

What is AMC? 👨‍🏫

At the very top of the theater industry stands a giant called AMC Entertainment. This is the company that owns a huge chunk of all big cinemas around North America and Europe, making it the go-to company for movie fans who still appreciate a big-screen experience.

After the acquisition of Odeon, Carmike Cinemas, and UCI Cinemas in the early 2010s, AMC became the dominant player in this sector. However, around this time, streaming services like Netflix gained a lot of popularity, and after the lockdowns in 2020, AMC lost a huge part of its business and its share price plummeted.

The struggling company then became a target of institutional short-sellers who got squeezed by a somewhat coordinated effort by retail traders on Reddit in early 2021. This led to an unbelievable increase in stock price (almost 20x for a while) and gave the company the capital, public attention, and it needed to potentially introduce changes to its challenged business model.

Now, AMC can be considered an intimidating stock, due to its troubled financials, but the fact that this giant could survive a pandemic, where other companies in this industry folded, gives it reason to be considered a worthwhile investment.

AMC Stock Price History 📙

As a stock, AMC has been in near-constant decline since the mid-2010s, save for a few price jumps that happened when the company acquired some of its competitors. However, that bearish trend got disrupted in early 2021 when investors pumped the price of AMC from about $2 to $60 in a matter of weeks. 

Price Prediction for AMC Entertainment 🔮

Let’s analyze AMC to see what the stock is made of before trying to tell its fortune. First of all, AMC’s business model is cinema—the company operates top-notch movie theaters all around the world. This business model isn’t new and faces challenges from the growing innovation with digital streaming services.

However, people still go to the movies and it shows on AMC’s financial statements—with its current cash flow, AMC can continue to operate for years. Moreover, the company’s revenue had somewhat recovered from the hit it suffered during the pandemic. 

Also, AMC is still in the sights of short-sellers with about 21% of its stock tied up in short sales—this means that another short squeeze isn’t impossible. However, there is another side to AMC stock that investors should be wary of.

AMC has a considerable amount of debt—as of April 2022, the company has a total debt of about $5.2 billion and a debt-to-equity ratio of -253%. This means that the company has more liabilities than assets, plus they have a $5 billion corporate debt—from a fundamental analysis standpoint. While debt isn’t always a sign of trouble ahead for a company, investors should make note to follow AMC’s financials closely should they choose to invest.

How to Start Trading AMC Stock? 👷‍♂️

Like most companies in the contemporary financial environment, AMC can only be traded on the public stock exchange, either through a broker or through direct investment in a fund that owns AMC stock. The easiest and cheapest way to purchase AMC stock is by opening an account with a free brokerage and buying the stock through an app or desktop trading platform. Here is how this works:

Choosing an Online Broker and Creating Account 👨‍💻

The first step is signing up with a broker that meets all the needs of a stock investor. Nowadays, a stock investor needs 3 things above all else from a broker: Access to enough financial markets, an easy-to-use investing platform and mobile app, and free stock trading.

It is worth noting that the trading of AMC stock was halted at one point by popular brokers like Robinhood and WeBull. So, investors concerned by this can opt for a service like Interactive Brokers that has all the perks which any of the top stock brokerages offer, but hasn’t restricted their traders from buying and selling AMC in 2021.

The process of signing up to one of these brokerages online only takes a few minutes, and accounts are usually verified and up and running in a matter of a couple of days. Discount brokers also don’t require maintenance fees or minimum deposits, so any amount of starting capital is acceptable.

Decide on Your Investment Size and Strategy 📝 

The stock market is not a place to improvise—simply, as with anything involving money, an investing strategy must be safe and limit all unnecessary losses as a priority. When it comes to investing in AMC, the best way to profit off of the stock is by shorting it or buying a put option.

With inflation on a rampage, and fears of a recession continuing to grow, industries like the entertainment industry may have an uncertain future. So it could be safer to assume that this stock could lose value in the medium and long term— hence the need to opt for shorter-term investing strategies here.

Additionally, if it turns out that AMC gets squeezed again as some analysts believe it can be, it might be beneficial to hedge any short position with a call option, or by buying shares to offset any losses if the stock does appreciate.

Executing the Trade ✅

The next step is actually clicking the trade into existence on a trading platform. As buying a put option is much safer than shorting a stock (the maximum potential downside is limited to the price of the option’s premium), investors usually use one of the top options brokers for these types of trades in order to get everything they need as quickly as possible and at the lowest price.

If the investor buys actual shares as a means of hedging the trade, it is best to set up a sell order as soon as the share is purchased. Namely, even big price swings can happen suddenly and be gone in a matter of days or even hours—setting up a sell order will sell the stock automatically as soon as it reaches a certain price.

Exit Strategy 🚪

As in many things in life, in investing, knowing when to get out is even more important than getting in at the right moment. When it comes to put options, we have two basic exit strategies: we can either sell the option before its expiry date or wait for the expiry date to cash in.

If the trade seems to be going opposite to what we predicted when we entered it, getting out early and selling at a loss is better than waiting longer and selling at an even greater loss. However, if things are going well and we believe that our prediction will become reality, we should ideally wait for the expiry date to maximize our profit.

Alternative Ways to Buy AMC Stock 🗃

Movie theaters might be an industry of the previous century, but AMC follows all the modern trends as a stock. Namely, AMC doesn’t sell shares directly via direct stock purchase plans, the easiest way to buy them is via an online broker. However, there are a few ways to invest in AMC indirectly or through a crypto exchange.

ETFs 📄

The most hassle-free way to indirectly buy AMC is by simply investing in a broad-market ETF that holds the stock. This way, an investor can buy AMC while still keeping their risk low because ETFs are inherently diversified assets and can hold dozens, if not hundreds of stocks. 

As we’ve discussed, AMC is not a risk-free stock by any means, so a safe approach is warranted. Some of the most popular ETFs that hold AMC stock are iShares Russell 2000 ETF (IWM), iShares Russell 2000 Value ETF (IWN), and the Vanguard Mid-Cap ETF (VO).

Mutual Funds 📜

The rationale behind investing in mutual funds and ETFs is almost exactly the same, however, there are a few differences. Namely, ETFs have lower management fees but aren’t managed as actively as some mutual funds. Therefore, only mutual funds with great management are a preferable alternative to an ETF.

Some of the biggest and most popular mutual funds that hold AMC among other stocks include the Vanguard Mid Cap Value Index Fund (VMVAX), the Vanguard Growth Index Fund (VIGAX), and the Fidelity Small Cap Index Fund (FSSNX).

Stock Token 🪙

A stock token of AMC was launched in early 2021—this is a crypto token that acts as a digital share. The token is called AMC Entertainment Holdings tokenized stock (AMC), and each token represents a share of AMC—and that makes its owners eligible for discounts and preferential treatment in some of AMC’s theaters and arenas.

All in all, the token exists and can be bought on most major crypto exchanges, but it is fairly illiquid, which makes it hard to sell the AMC token quickly should the stock crash—therefore, buying shares through a stock broker is the preferable method.

AMC’s Top Competitors and Their Performance 📊

AMC is a giant in the movie theater industry, but the U.S. is a land of giants, a few of which are AMC’s competitors. While no brand can really come close to AMC Entertainment when it comes to movie theaters, cable TV networks and streaming services can be considered its strongest competition.

AMC Networks (AMCX) 🎥

The most notable competitor is probably AMC Networks (AMCX)—although it sounds like AMC Entertainment’s sister company, there are actually two different enterprises. AMCX manages several TV stations and online streaming services, and it also distributes movies and other video content. 

As a business, AMCX is a bit more modern than AMC as it is deep into a myriad of digital services, and its balance sheet looks dramatically better. Namely, AMCX’s debt of $2 billion is 2 times higher than its total assets, but the company is steadily decreasing it—if we compare that to AMC with its $5 billion in liabilities, we can see that AMCX is in much better shape financially.

Warner Bros. Discovery (WBD) 🎬

Another notable competitor in this arena is Warner Bros. Discovery (WBD)—this is the branch of the Warner Bros. empire that is in charge of large-scale distribution of movies, video games, and everything in between. The company owns dozens of popular TV channels including Discovery, TLC, Animal Planet, etc.

Again, WBD has a much more modern and flexible business model as it is a distributor of video content that can be played in movie theaters, TV screens, and streaming sites all the same. Moreover, it is financially much healthier than both AMC and AMCX: its debt-to-equity ratio is roughly 105% and decreasing, which means it only has a bit more liabilities than assets. Compared to AMC Entertainment, this is an outstanding financial record.

All things considered, there are a few well-known companies that are in a very similar business as AMC Entertainment but have better future prospects because of their more modern business model. Moreover, almost all AMC’s competitors are far better off financially—some even call AMC a zombie corporation that will face a huge challenge if U.S. monetary policy tightens up. 

Nonetheless, as far as stock prices go, AMC has outperformed most of its competitors in the past few years. All in all, looking at their historical performance, neither AMC, nor its competitors we’ve mentioned here are better as short-term investments.

About AMC’s Leadership: Top Executives 👔

Big corporations have an advantage in the markets because of their size—but that is also a weakness. Any huge enterprise is extremely complicated to manage, so the performance of these businesses is heavily dependent on the skill of their managers and leaders. So, let’s see who is directing AMC from behind the curtains.

CEO – Adam M. Aron 💼

Since 2015, AMC Entertainment Holdings, Inc. has been led by Adam M. Aron, a very experienced ex-CEO of multiple companies in the sports and leisure industry. Born in 1954, he first became a CEO and president of a company in 1993 when he was the head of Norwegian Cruise Line.

Later, in 1996, he became CEO and president of Vail Resorts, where he had success in “transforming the ski industry.”—namely, Aron cut seasonal ski pass prices from $800 to $199 at the time, which increased sales by 1200%. He was even the CEO of the Philadelphia 76ers from 2011 to 2013.

Judging by his history at AMC, it’s clear that Aron was brought in to assist with the company’s expansion. Just a year after Aron came to power in 2015, AMC acquired Carmike Cinemas, UCI Cinemas, and Odeon Cinemas, which made AMC the single largest movie chain on the planet.

Sean D. Goodman – Executive Vice President and Chief Financial Office 🤵

Like all key personnel in AMC, the company’s EVP and CFO is a veteran in the business and has worked with several big brands over the years. Sean D. Goodman started his executive position in AMC in February 2020, but before that, he had the same role in the Asbury Automotive Group, Unifi, Inc., and Landis+Gyr Group.

By looking further into Goodman’s past, we can see that he is a Harvard graduate who also worked for Home Depot as a finance professional and at Morgan Stanley as a mergers and acquisitions expert. 

All in all, Goodman has the background of a true top-level financial expert and manager. His total compensation in 2021 was $4.7 million and he owned roughly 4.4 thousand shares of AMC at that point in time.

Elizabeth Furst Frank – Chief Content & Programming Officer and EVP 👩‍💼

As one of the key personnel with the longest tenure, Elizabeth Frank started working for the company back in 2010. In 2012, she became one of the EVPs and the chief content and programming officer.

Prior to her career in AMC, Frank graduated from Lehigh University and got her MBA at Harvard—after entering the professional world, she held a number of high-level management roles in large companies such as Spirit Realty Capital, Inc., Global Health Council, Open Read Films, AmeriCares, and others. 

All in all, Elizabeth Frank has a splendid resume that justifies her leadership role in AMC. In 2021, she owned approximately 4,200 shares of AMC.

Pros and Cons of Buying AMC Stock ⚖

The pros of investing in AMC are few—shareholders get discounts and preferential treatment in AMC’s theaters, and they might profit if another short squeeze happens. However, if short-sellers learned their lesson from the previous squeeze, they will tread more lightly and avoid falling into the same trap again.

On the other hand, there are a few areas of concern to take into consideration: The company has accumulated a significant amount of debt (around $5.5 billion) and its assets are valued at around -$2 billion, which means that the company is essentially a zombie corporation as some analysts claim.

Moreover, AMC’s business model is in an industry that is struggling to adapt to the future. Cinema theaters have been losing customers to TV stations, and online streaming services for years. Theaters simply carry too much overhead compared to a streaming website and are far less accessible to consumers due to their higher price and physical location. But, the last 18 months have shown us that audiences still value the cinema and blockbuster films are selling out.

Despite positive revenue reports, AMC has a very long way to go before it can even begin to lower its debt to a reasonable level. It has been in decline both financially and as a stock for the past few years, which is why positive criticism from investors is hard to come across.

How To Reduce Trading Risk 🤔

As we’ve discussed, AMC comes with a fair bit of risk and unpredictability. Therefore, if a trader decides to invest in it, there are a few very important safety measures that will make sure that their portfolio doesn’t suffer too much if things go south.

Diversification 📃

No portfolio should only have one stock, and when it comes to volatile stocks like AMC, it is best to only devote a small chunk of a portfolio to it. This is because AMC is a high-risk, high-reward stock—its potential losses are too great, and its potential gains are very good, so a trader does not need many shares to turn a good profit.

Speed of Execution ⌚

AMC have experienced tumultuous times in previous years. Therefore, if a trader wants to make a profit off of sharp upswings in the stock’ price, they should time their trades and look at short-term opportunities—using buy and sell orders is crucial here because it is simply too time-consuming to wait for the perfect moment to execute a trade manually.

Taking a Safe Short Position 🛡

Going long is risky because this is what history and fundamental analysis tell us. On the other hand, shorting AMC might not draw favorable results.

However, buying a put option is a viable solution. Simply, the maximum downside of an options contract is the price of its premium—even if a short squeeze does happen and the stock goes to the moon, it will not be too bad.

Conclusion: Should You Consider Buying AMC Stock? 💬

So, should an investor buy AMC stock or not? It really depends on you, the investor, and your level of risk tolerance.  The company’s business model seems to be stagnating in a rapidly-evolving industry and AMC’s financials are concerning. 

The combination of concerning financial health, questionable historic performance compared to the stock market average, and a lack of innovative plans for the future makes AMC all but a stock that has very limited potential for growth. 

The short squeeze that sent the stock to the moon in 2021 was in part possible because institutional investors bit more than they could chew—they didn’t think that public retaliation against their short positions was possible and they didn’t prepare. 

So, do your research and evaluate your financial goals before deciding to dive in to this stock.