‘King’ of meme stocks: Up nearly 3,000% in 2021, capitalization more than half of companies in the S&P 500

From small cap, AMC became a large cap company in just a few months. The 95% increase in session 2/6 in the context of frenzied retail investors brought the capitalization of the cinema chain to 31.3 billion USD. Accordingly, AMC is worth more than half of the companies in the S&P 500. Currently, AMC’s market capitalization is higher than that of Tyson Foods Inc. and Delta Air Lines Inc., although revenue is not expected to be high.

This year, thanks to investor group Reddit, shares of AMC have increased 2,900% despite the company still having many financial problems. On June 1, AMC increased 23% and continued to double yesterday. In the last 2 weeks alone, the increase has been pushed up to 390%. Accordingly, AMC is also higher than all other meme stocks, including GameStop, which currently has a market capitalization of about $21 billion.

AMC’s capitalization compared to the average of the 3 indices.

In the context of the Covid-19 epidemic that closed cinemas around the world, AMC’s capitalization hovered just under $500 million for most of last year. Just a few months ago, AMC was on the verge of bankruptcy. Its capitalization was only at $216.8 million in April last year. The movie theater frenzy among retail investors has changed the course for the stock this year.

Capitalizing on the crazy rally, AMC raised $230 million directly from its creditor, Mudrick Capital Management, earlier this week. Even yesterday, AMC added momentum when it said it would give its retail investors special screenings and free popcorn.

While Mudrick quickly sold all of his shares to lock in profits and said the company was overvalued, the Reddit crowd didn’t accept that.

Adam Aron, CEO of AMC, said: “Many of our investors have shown their support and confidence in AMC. They are the owners of AMC and I work for them.”

The rise of meme stocks this year.

As of March 11, there were more than 3.2 million investors holding shares in AMC, representing more than 80% of their total investors, according to Aron. Earlier last month, Aron spoke directly to many new investors during the earnings call, where he praised their enthusiasm and commitment to AMC.

Even after the spike in January, many professional investors still don’t appreciate the fact that the Reddit investor is a serious motivator, and it’s very unlikely that market movements will be stable.

“Things are getting very ridiculous. Not just AMC, but other meme stocks,” said Edward Moya, senior market analyst at Oanda Corp..

Although the dizzying momentum has brought great joy to investors in this meme stock, the company’s profit outlook remains unchanged. AMC is still struggling due to the effects of the pandemic, with analysts all lowering their estimates for profit before interest, taxes and amortization. Currently, they forecast AMC will lose nearly 100 million USD in the next 12 months.

AMC’s long-term debt has ballooned to more than $5 billion over the past five years.

Not stopping there, AMC’s debt burden is getting bigger and bigger. The company has seen its long-term debt nearly triple from less than $2 billion in 2016 to $5.4 billion in the first three months of this year. Despite the stock’s strong rebound this year, analysts keep their target price unchanged. AMC’s 12-month average price target has more than doubled since November to $5.11, but is still 90% below current levels.

Refer to Bloomberg