Is It Because of Meme Stocks?

Entertainment-based investors rejoiced earlier this week, as AMC Theaters once again saw a decent, yet sudden, growth in the stock market. 

More specifically, it managed to rise 7.8% this Thursday alone.

However, with the matter of meme stocks being such a trend during this pandemic, investors were still in doubt regarding AMC Theaters’ true potential for future growth.

Was all of this just yet another temporal development? Or was this an actual indicator of AMC Theaters finally overcoming all of its current adversities?

What are meme stocks?

For those unaware of what the term “meme stocks” encompasses, here’s a summed-up version of the series of events that eventually led to the term being coined in the first place.

In early 2021, GameStop was facing one of its lowest financial points ever. During that time, the popular video game retailer was even facing a massive risk of going bankrupt.

However, once Reddit users became aware of this situation, they managed to organize themselves via the discussion website with a single purpose. Altogether they were to massively buy GameStop’s stocks, as many as were needed to counter this reality. 

In due time, this alliance was capable of preventing GameStop’s entire decline. Furthermore, it allowed GameStop to become one of 2021’s fastest-growing stocks, as well as one of the year’s most valued ones. For a while, at least.

Once the whole ordeal was finally over, testimonies then indicated a variety of reasons regarding why doing all of it in the first place. While some openly admitted that their decision was purely based on nostalgic value alone, a significant percentage was “just because.” 

For its nature, this phenomenon ended up being known as “meme stocks.” Yet, it did not end there. Reddit’s users then went on to successfully repeat this process time and time again, only now working with multiple companies at the same time. And AMC Theaters happened to be one of them. 

They even applied this process multiple times to this same company.

In essence, that’s where all the uncertainty regarding AMC’s current rise originated from. To simply put it, people are incredibly hazy on whether it is a legit growth or another “meme” based one.

So, why did AMC Theaters rise this time?

Surprisingly to some people, the company did manage to pull some growth out of its own merits this time. But how?

It stands to reason to say that, as people were unable to attend due to the COVID-19 pandemic, AMC Theaters went through one of its lowest financial moments of all time. However, there’s something that investors weren’t considering this time before going straight to economic uncertainty.

Nowadays, with vaccine rollouts getting higher and better every day, the country’s situation is finally changing for the best. According to the Centers for Disease Control and Prevention, up to 40% of the population have already received at least one dose of a vaccine, and 26% have already received all the necessary doses.

Also, 13 states no longer enforce mandatory use of a face mask when in public.

With these numbers in mind, it is safe to assume that people are once again feeling comfortable enough to resume their pre-pandemic activities. Spending their leisure time in a movie theatre is one of them. 

While several pandemic restraints are certainly still in effect, AMC Theaters is indeed performing better than initially expected. Right now, Godzilla vs. Kong is probably the best example of this, as it has managed to reach a total domestic box office of $80 million so far, with AMC’s returning customers being critical players in the matter.

Sadly, it’s still too soon to give a proper judgment on whether AMC Theaters is a worthwhile investment opportunity or not. And with no appropriate reference to look into, nobody can honestly know where the company can go from here. 

Nevertheless, entertainment-based investors can now rest assured that its current growth is a proper one. Our recommendation: as things develop, do keep a close eye on the company. It still might become an excellent company to invest in, but only time will tell.