By Janet H. Cho
Investors have seen this movie before.
A Monday rally in shares of the meme-stock favorite GameStop also lifted the theater chain AMC Entertainment Holdings. AMC stock closed up 78% at $5.19 on Monday, the highest close since the $5.29 closing price on Jan. 8, and the largest percentage increase since June 2, 2021, when shares rose 95%, according to Dow Jones Market Data.
AMC not only snapped a five-day losing streak, but its preliminary trading volume of 476.3 million shares is the highest amount on record.
People betting against the stock have taken a beating, just as they did in the meme-stock trading frenzy during the pandemic. The estimated paper loss for the day for AMC shorts was $127 million, according to the data analytics company S3 Partners.
Before Monday, shorts were up by $102 million in the stock, but with the latest surge in the price, it is now a losing short trade for 2024 by about $25 million. S3 Partners said AMC short interest is currently 55.9 million shares, or 19% of the float. So far this year, short interest has climbed 140%, or 32.6 million shares.
That reversal is reminiscent of the meme-stock era, when buying by retail investors triggered share-price gains in a number of companies that led to losses for traders who had bet that the prices would fall. GameStop is the best-known example.
AMC said when it reported its first-quarter earnings last week that it is still suffering from last year's actors' and writers' strikes, which have meant fewer films reached the market. Management said it expects second-quarter box-office ticket sales to remain below last year's record second quarter.
AMC also has a heavy burden of debt, with significant obligations due in 2026, and is looking for ways to manage it.
"We remain optimistic that AMC will successfully navigate its current challenges, supported by a resilient management team dedicated to finding creative solutions for their debt issues," Benchmark analyst Mike Hickey wrote in a research note on Thursday.
Although North American box office revenue fell 6% because of the strikes, "AMC successfully maintained its revenue levels close to the previous year, increased its domestic market share, and enhanced per patron profitability metrics well above pre-pandemic levels," in part because of efforts to contain costs, the note said.
"We believe that box office growth will accelerate in the second half of 2024 and beyond, as recovery momentum picks up," Hickey wrote.
Write to Janet H. Cho at janet.cho@dowjones.com
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May 13, 2024 17:05 ET (21:05 GMT)
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