AMC Surprised The Street; Short Squeeze May Ensue

Strong first quarter (Q1) earnings have AMC (AMC) stock momentarily moving upward.
A short squeeze potential exists again for AMC stock.
The earnings beat is also affecting other meme stock prices.

Source: QualityHD / Shutterstock.com

If nothing else, AMC Entertainment (NYSE:AMC) stock continues to prove its ability to shock the market. The news this time was that the meme stock managed to report a first-quarter earnings beat. That news had share prices moving higher by more than 5%.

That said, let’s get into the specifics of what happened and what this means for investors moving forward.

AMC

AMC Entertainment Holdings, Inc.

$12.76

Earnings Beat

The most important news for AMC is that it surprised the markets positively with its first-quarter earnings beat. The ongoing downward slide in growth and meme stocks makes the news especially noteworthy.

AMC beat consensus expectations on multiple fronts. The company was expected to post a non-GAAP loss of 63 cents per share on revenues of $743 million. But AMC surprised everyone by posting a non-GAAP loss of 52 cents on revenues of $785.7 million.

Additionally, on a year-over-year basis, attendance surged. The company recorded 39.1 million people in attendance during the quarter, an increase from attendance of 6.8 million a year earlier.

However, it must be noted that despite the upsurge based on the positive news, AMC stock remains down on the year. In fact, even accounting for the price surge, the stock has sloughed off more than 50% of its value this year.

Short Squeeze Watch

Short squeezes are typically triggered by unexpected good news that serves to drive a stock price upward, or a gradual buildup of buying pressure that outweighs selling pressure in the market. So, it is clear that AMC should now be on short squeeze watch given that unexpected good news has befallen the company.

Otherwise, it is usually necessary for short interest to be above 20% for a short squeeze to be enacted. According to the Wall Street Journal, the short interest in AMC stock is only very slightly below that 20% threshold.

Affecting Other Meme Plays

AMC’s unexpected earnings beat caused GameStop (NYSE:GME) stock to unexpectedly shoot up more than 10% without any other news. Funnily enough, it was only a few months ago that GameStop earnings caused AMC stock to move quickly upward.

So what should investors take from all of this?

What to Do with AMC Stock

My instinct is that this is simply temporary good news that investors probably won’t be able to do much with. At the end of the day, AMC still lost $337.4 million in the first quarter.

Once the market digests this truth, the temporary high of the earnings beat will probably wear off. Predicting a future short squeeze is notoriously difficult, so despite any good news, I would suggest staying away since AMC stock remains significantly down on the year.

On the date of publication, Alex Sirois 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.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks.Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

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