AMC Entertainment's shares spun on Friday as speculative trading activity continued to escalate.
The stock closed 1.5% after rising 38% the previous Friday. Despite the intraday reversal, stocks rose more than 116% for weeks, taking their monstrous rally to 1,132% in 2021.
More than 650 million AMC shares changed hands on Friday, far exceeding the 30-day trading volume of 106 million on average.
AMC was by far the most active stock on the New York Stock Exchange on Thursday. Almost 700 million shares changed hands. The stock recorded its highest trading volume of 1.25 billion shares on January 27.
"The retailer is back," said Edward Moya, senior market analyst at Oanda. "The AMC500k and AMCSqueeze were trending on Twitter yesterday, and those momentum pushed the stock price above the late January high we saw during the height of the meme stock craze."
The cinema chain has overtaken GameStop as the most popular stock on the infamous WallStreetBets Reddit forum. This is evident from Bank of America's analysis of the mention of stocks on the chat page.
Avid Reddit traders encourage each other to double up AMC's stock and call options by sharing screenshots of their portfolios and promoting massive returns. A trend post on WSB Friday reads: "$ AMC YOLO UPDATE: 4948 shares, 10 calls, over 4 brokers, and I'm still not selling!"
GameStop, which was the star of the show amid January's retail frenzy, fell 12% on Friday, reducing its weekly profit to 25%. AMC's 2021 profits also exceeded GameStop's 1,078%.
According to data from S3 Partners, AMC's surge this week caused short sellers to lose $ 1.2 billion.
Brief coverage could fuel AMC's massive rally this week. When a sharply shortened stock bounces higher, short sellers are forced to buy back borrowed stocks to close their short position and reduce losses. The forced buy tends to accelerate the rally even further.
AMC is a heavily shortened name that, according to S3 Partners, sells about 20% of float stocks short, compared to an average of 5% of a typical US stock.
While business began to recover as the economy reopened, AMC is still facing tough headwinds, including theater capacity and competition from streaming services.
The company, which has approximately $ 5 billion in debt and $ 450 million in deferred lease repayments, saw its revenue decline sharply due to the coronavirus pandemic.
"Anything that's really important here in the long run will never make money to this company again," said Rich Greenfield, co-founder of LightShed Partners, on CNBC's "Squawk Box" Friday. "They will never generate cash with their current capital structure. It was trading at 7 times EBITDA before the pandemic. It is currently trading at 25 times EBITDA and is now in a worse position in the changed industry. This simply contradicts all logic. "
– CNBC's Sarah Whitten contributed to this article.
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