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The market ends mixed despite good earnings reports.
The stock market indices ended the day mixed, with only the DOW finished the green.
18 companies in the S&P 500 this week beat analysts' earnings expectations, yet the index was still not able to beat its previous record. A slightly weaker-than-expected Chinese GDP growth may have given investors the indication of slower global recovery in the rest of the world.
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AMC STOCK ANALYSIS - SHORT SQUEEZE
Is the AMC stock squeeze over?
Folks, an interesting question came through our private Facebook community the other day that I want to dedicate today's episode to discussing with you.
A fellow Stock Cardian asked, is the AMC Entertainment (AMC) short squeeze over?
To answer the question, let's step back for a second. 2021 has been quite an interesting year in the stock market, and the rise of “meme stocks” is definitely part of it all. Reddit forum Wallstreetbets began the meme mania with Gamestop (GME), and it has since spread to other companies. If you’ve been paying any attention to headlines, AMC Entertainment (AMC) has been the other favorite stock of retail traders banking on hype and short interest. Unfortunately, as time has gone on, things haven’t panned out quite as cleanly. On Wednesday, for example, AMC's share prices dropped 15%, bringing it down to half the price of its record high only a few weeks before. Let’s take a deeper look into this stock to find out where it might be headed.
The mystical short squeeze was the goal of many recent meme stocks, AMC included. Hoping to capitalize off of cheap and heavily shorted stocks, retail traders piled on to push the stock price high enough to trigger the so-called short squeeze. This is the point when institutional investors who have bet against the stock have to buy the shares at the new and higher price to cover their short bets. That consecutively drives the stock price further up. But, that strategy seems to not be working anymore. Let’s explore three big factors that need to be considered:
From my perspective, the odds are high that the boat has already sailed if you were wanting to benefit from the short squeeze excitement. The pressure on short sellers to cover their positions fades by the day, and I’m not sure if AMC can gather enough steam to break out into new highs. The only wild card here is exciting news. For example, if AMC manages to partner with a large corporation, or some new large investor comes in to invest or buy the company. So, the short squeeze probability is low but you never know whether a wild card is around the corner or not.
For full transparency, I have some shares of AMC, which I bought at $15 and am still holding just to have a stake in this phenomenon.
AMC STOCK ANALYSIS - FUNDAMENTALS
An educated look at the future of AMC stock.
We can't talk about stocks and not do fundamental analysis. If you were considering owning AMC stock for the long run, here’s a cautious reminder that analysts are giving out a price target of $5.25, under the “Fair share price estimate” tab on its Stock Card. Investors and hedge funds alike recognize that the current price is not sustainable or reflective of the real value in the company. This might not matter in the short term when emotions are running high, but over time it’s inevitable that it will cool down and revert back to a realistic price.
To understand why analysts' price target is so low, let's do some stock analysis. I headed to AMC’s Stock Card again. Under the company's operational section, I'm curious about how long AMC can hold and fund its operations. I noticed the debt situation. Clicking on “Cash Availability” gives me more in-depth data. Its debt to equity ratio and debt affordability ratio are both quite poor. Clicking into “Profitability” raises another red flag- the company’s Earnings Per Share are terrible as well. The management is aware of this hole it’s in but is still crafting a strategy to climb out. One of these strategies included being able to raise capital by selling 25 million more shares,but this move was voted down by current shareholders.
So, the strategy for AMC is a bet on a possible wild card, like a possible good piece of news that changes the current trend, that's all. There is no fundamental to support the stock and the short squeeze probability is low based on measurable information. I would be wary of entering into the stock this late in the game.
MEME STOCKS TO BUY NOW
What are the Potential Meme Stocks that are worth buying now?
Let's wrap up discussing the best way you can find other potential meme stocks that are actually worth buying now. I told you last week about the launch of the "potential meme stocks" on Stock Card. Type in meme stocks in the search bar and get the full list of almost 300 companies.
We created the meme collection for you to know why some stocks fluctuate so rapidly, and you can also use the list to find some good investments. Just because something is a meme stock doesn't mean it's a bad company.
So, I go to the screener page, create a new filter, add meme stock collection, and filter the list for stocks with high growth potential, strong sales growth, and no cash concerns. Those are some of the indicators that a growth stock can keep growing despite the high volatility that comes with a possible short squeeze.
Click apply and voila, a list of 22 meme stocks worth buying. This is of course a starting point, add your own criteria and get to the final list. I’ll save my watchlist for you and you can get the list here:
Get the watchlist of meme stocks to bu now!
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