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8 Reasons AMC Entertainment Can Head Back to Its February Low

There’s little question that 2021 is going to be remembered as the year of the retail investor. Even though John and Jane Q. Public have been putting their money to work in the stock market for over a century, they’ve never rocked the boat quite like they have this year.

At the top of the buy list for retail investors is movie theater stock AMC Entertainment (NYSE:AMC). Of the more than 8,000 securities listed on Finviz, AMC is the year’s second-best performer, with a gain of close to 1,400%.

Image source: Getty Images.

Retail investors go bananas for AMC

Arguably the biggest reason retail investors love AMC is the potential for a short squeeze. A short squeeze describes a very short-term event where short sellers (i.e., pessimists betting on a company’s share price to head lower) collectively feel trapped in their positions and run for the exit. Buying to cover their short-sold positions can cause a rising share price to explode higher. It’s precisely what happened in late January, when short sellers were expecting AMC to file for bankruptcy protection, but the company raised enough capital via share and debt offerings to take the possibility of near-term bankruptcy off the table.

As of July 15, New York Stock Exchange-reported data showed that 79.75 million shares were held by short sellers.

Retail investors also seem to really like the company and view it as a coronavirus pandemic rebound play. As U.S. and global vaccination rates tick higher, AMC has been able to increase the capacity utilization of its theaters. According to CEO Adam Aron, AMC has seen capacity utilization in the U.S., where it has a majority of its theaters, increase from 41% in the first quarter to 61% in Q2, and to 68% through the first couple of weeks

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