- AMC stock has been in a downtrend for a very long time; can it bounce back?
- The stock is struggling in terms of financials, as the operating income and equity are in the negative zone.
- MACD has given a buy signal; is it the time to buy for the short-term?
AMC Entertainment Holdings, Inc. was founded in 1920 as an American movie exhibition company. It is listed on the NYSE, and it has the largest share of the US theater market. The CEO of AMC Entertainment is Adam Aron who is currently leading more than 33 thousand employees.
Brief Financials and Key Performance Ratios
In the most recent quarter ending in March 2023, AMC disclosed a revenue of $954 million, reflecting a marginal 3% decline compared to the previous quarter. Despite this, the company’s gross profit remains in the positive territory. However, the operating income paints a different picture, with a reported negative value of -$108 million. This can be attributed to the significant proportion of operating expenses, particularly Rental & Landing Fees, which constitute over 27% of the total.
As anticipated, AMC Entertainment INC’s net profitability remains negative, with a net income reported at -$236 million. Furthermore, a closer look at the cash flow statement over the past three years reveals a consistent pattern of negativity in the Cash from operating activities. Notably, the net cash flow for the year 2022 was particularly stark, registering at -$965 million. These financial insights provide a comprehensive understanding of AMC’s recent performance and financial health.
Key Performance Ratios:
· Trailing twelve months (TTM) gross margin: 66.7%.
· TTM operating margin: -11.3%.
· TTM net margin: $-21.3%.
· TTM Earnings per share: $-0.77.
· TTM P.E ratio is negative.
· Debt to equity ratio is negative at -1.90% which is a complete red flag for investment.
The Metrics have been calculated by financial statements, provided by macrotrends.net
AMC Stock Previous Price Action and Forecasting
Since 2016 AMC stock has been in a downtrend for a long time and it has not yet recovered.The reason is likely the inconsistent revenues and negative operating income.
The slow downtrend of the stock is causing all the supports to be broken. However, in December 2022 the stock made floor support of around $3 and is seen to be bouncing off from there earlier this year during March, April, and June. During that time, a resistance level of around $7 is present.
AMC‘s Current Price Action and Forecast
The current trading position of the stock stands at $5, with discernible support and resistance levels in proximity. Despite this, the AMC stock remains entrenched in a downtrend.
Exploring the support and resistance dynamics, an immediate support materializes at the $3.81 mark, validated by its confirmation on three occasions this year. A secondary support zone emerges at $3.14, originating more than two years ago in February 2021.
On the resistance front, the first hurdle presents itself at $6.11, having functioned as a support a year ago on May 22. However, due to subsequent downtrends, this level was breached. The second resistance level is observed at $7.66, subjected to testing on two separate occasions in the recent past.
Indicators
Despite the prevailing downtrend, notable indicators provide insights into potential short-term shifts in AMC’s stock dynamics.
The MACD indicator showcases a distinct occurrence where the Signal line surpassed the MACD line in June. This occurrence implies that the Exponential Moving Averages (EMAs) in the present period possess greater strength than the past 26 days. Consequently, a brief uptrend could materialize over a shorter duration.
The relative strength index (RSI) also offers a noteworthy perspective. After touching the 27 mark in June 2023, the RSI has followed an upward trajectory and currently stands at 54. This upward momentum suggests a potential strengthening, with an eventual goal of reaching the 70 mark.
However, it’s important to consider EMAs, lagging indicators that underscore the ongoing downtrend. Both the 200 and 50 EMAs exhibit a downward trend, with no imminent signs of crossover.
In the case of AMC, financial indicators point towards weakness, including negative shareholders’ equity. This financial fragility raises concerns about the viability of investment in the stock.
For short-term traders, the RSI and MACD indicators align to support a potential uptrend. If the stock surpasses its resistance level of $6.11, a buying action could be a viable consideration.
Conclusion
The company’s enduring legacy in the entertainment sector is marked by its substantial presence in the US theater market. Nonetheless, AMC’s financial struggles have cast a shadow over its trajectory, contributing to a protracted downtrend in its stock value. This blend of historical significance and contemporary financial hurdles characterizes the current landscape for AMC Entertainment.
Technical levels:
Support: $3.1, $3.14
Resistance: $6.11, $7.66
RSI: 54
50 EMA: $4.71
100 EMA: $5.82
Disclaimer
The views and opinions stated by the author, or any people named in this article, are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.
