AMC Stock Outlook: Billionaire Bails, But Does a Comeback Beckon?
There’s a bad news, good news situation happening with global movie-theater chain AMC Entertainment (NYSE:AMC). The bad news is that a highly respected investment fund reportedly liquidated its full position in AMC stock. However, the good news is that at least one analyst envisions growth and improvement for AMC Entertainment based on expected box-office receipts.
AMC Entertainment is, as you probably know by now, the focus of meme-stock traders and fans known as “apes.” As such, AMC Entertainment is a controversial company, and some folks aren’t willing to invest in it.
However, there may be reasons to consider a small share position in AMC Entertainment now. So, let’s see who just sold off his stake in AMC Entertainment and then consider whether it might make sense to stay in the trade.
Ray Dalio’s Fund Divests Its Position in AMC Stock
Bridgewater Associates, which famous billionaire Ray Dalio founded, reportedly ended 2022 with $261,000 worth of AMC Entertainment shares. Does that mean Dalio and Bridgewater are bullish on AMC Entertainment now? Not likely.
A filing reveals that Bridgewater Associates sold its entire position in AMC stock during this year’s first quarter. Unfortunately, we can’t know for certain why Dalio and Bridgewater decided to do this.
AMC Entertainment’s long-term shareholders have fared poorly since the meme-stock bubble burst in 2021. So, maybe Dalio simply chose to move on to more promising investment opportunities.
It’s also possible that Dalio wasn’t particularly bullish on AMC Entertainment’s recent foray into gold and silver mining. Specifically, AMC Entertainment unexpectedly invested $27.9 million in Hycroft Mining (NASDAQ:HYMC) last year.
AMC Entertainment CEO Adam Aron is confident (almost to the point of arrogance) about his company’s stake in Hycroft Mining. Yet, Dalio may be skeptical and could have decided to remove all exposure to AMC Entertainment in Bridgewater’s portfolio.
AMC Entertainment Could Be on the ‘Road to Recovery’
In contrast to the skeptics, Macquarie Research analyst Chad Beynon is optimistic about AMC Entertainment’s future prospects. Beynon sees the “[r]oad to recovery” for AMC Entertainment as “getting better with box-office strength.”
The analysts with Macquarie Research anticipate that domestic industry box-office revenue will reach $8.7 billion in 2023. If that happens, it would represent a 19% year-over-year improvement. However, it still wouldn’t be up to the 2019, pre-Covid-19 level.
Still, Beynon evidently expects this movie to have a happy ending. “We expect AMC’s business to grow with the market and benefit from strong flow-through given significant fixed costs in the business,” the analyst predicted. I tend to concur with Beynon’s assessment, but cautious investors should continue to monitor AMC Entertainment’s facts and figures closely, including domestic box-office receipts.
Position Sizing Is Key With AMC Stock
At this point, you might actually be more confused than ever. Dalio dumped his entire stake in AMC Entertainment. At the same time, Macquarie Research analysts envision a box-office boost for AMC.
At the end of the day, I feel that it’s fine to hold a few shares of AMC Entertainment in your portfolio. Just be aware that AMC stock can be highly volatile, so it’s wise to keep one’s position size very small. Or, if you’re not comfortable with that, feel free to grab some popcorn and watch AMC Entertainment from a safe distance.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
