Yesterday, shares of AMC Entertainment (AMC) jumped 20% higher after it was reported that Amazon is interested in acquiring the company.
The entertainment company has been through a tumultuous few years since becoming a meme stock during the pandemic, soaring to as high as $37/share at one point. Today, the stock sits at a mere $4.89/share. So, why is Amazon interested in acquiring the movie theater chain? And is there any substance to these rumors?
According to senior sources close to the matter, the goal is for Amazon to use AMC’s 600+ theaters as a way to promote its own series of Prime movies. Other uses for the theaters will include cross-selling opportunities and local distribution hubs. But perhaps the biggest reason Amazon has its sights set on AMC is for the data collection on 200 million moviegoers across the nation.
As far as the validation of these rumors, it’s been reported that Amazon sent a fleet of investment advisors and entertainment chiefs to discuss acquisition plans with AMC.
With that said, experts are unconvinced that anything will surmise from all this. For example, Alicia Reese of Wedbush Securities points to the whopping $4.6 billion in debt and premium valuation as reasons Amazon won’t actually go through with an acquisition at this time.
And on that note, the stock has already begun its journey back down to where it sat prior to these rumors gaining traction. Share prices have slipped 5% lower in Wednesday morning’s trading session. So – is it best that you sit this one out and avoid a play in AMC? Or, is it worth buying into the hype and adding this stock to your portfolio just in case?
Through the VectorVest stock analyzing software, we’ve uncovered 3 things you need to know before making a decision one way or the other…
AMC Has Very Poor Upside Potential With Poor Safety & Timing
The VectorVest system simplifies your trading strategy by giving you all the insights you need to make confident, calculated trades with just three ratings. These are relative value (RV), relative safety (RS), and relative timing (RT).
Each of these ratings sits on a scale of 0.00-2.00, with 1.00 being the average. By picking stocks with ratings above the average, you can set yourself up for consistent, successful trading. Or better yet, just follow the clear buy, sell, or hold recommendation VectorVest issues for a stock based on these ratings. As for AMC, here are the 3 current issues:
- Very Poor Upside Potential: Even as AMC sits at its lowest point in more than 2 years, the long-term price appreciation potential is very poor - as evidenced by the RV rating of 0.21. This rating is a comparison of the stock’s 3-year price projection to AAA corporate bond rates and risk. And further emphasizing this point, the current value for AMC is just $0.47 according to the VectorVest system.
- Poor Safety: In terms of risk, AMC has poor safety as well - with an RS rating of just 0.65. This rating is calculated by analyzing the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity.
- Poor Timing: To top it all off, AMC has a poor RT rating of 0.67 - even after the temporary spike yesterday. This rating is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.
All things considered, the overall VST rating for AMC is poor at just 0.57.
If you’re currently invested in AMC, you may be wondering if it’s officially time to cut losses or if there’s still reason to hold on to hope. You don’t have to play the guessing game or let emotion influence your decision-making - get a clear buy, sell, or hold recommendation with a free stock analysis at VectorVest today!
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VectorVest advocates buying safe, undervalued stocks, rising in price. As for AMC, it has very poor upside potential, poor safety, and poor timing - even after the news of a potential Amazon acquisition.
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