Meme stock narrative hits a pothole with AMC, but retail interest is climbing again
Aug. 11, 2021
By: Kim Khan, SA News Editor
AMC (NYSE:AMC) looked to hit all the right notes for its devoted retail investors on the earnings call, but an early pop in shares fizzled, wiping out the gains heading into the report.
The stock closed down 6% yesterday and nearly 14% from where shares opened when it looked like another push from the "Ape Army" was on its way.
CEO Adam Aron, known to the Army as Silverback, played to that crowd in the earnings call, floating ideas for a retail audience that cares much more about wild innovation than classic valuation.
Yes, AMC would consider partnering with GameStop (NYSE:GME). Sure, you will be able to pay for tickets and concessions with bitcoin (BTC-USD) by the end of the year. But Aron did balk at the idea of making a gorilla the official AMC mascot and dismissed a return of drive-in theaters as simply a bad economic idea.
From a more fundamental perspective, AMC's results looked good at first blush, beating estimates and noting $2B in liquidity.
That led to the initial extended-hours pop in shares. But big concerns about the business model remain.
SA contributor ASB Capital says that attendance is simply not improving enough.
Aron is "telling you that the industry will not be back to normal in 2021, probably will not be back to normal in 2022, and the company only 'maybe' has enough cash to survive anything much less than a full recovery in two years."
SA contributor The Asian Investor notes that the "size of AMC’s losses and the deeply negative cash flow in Q2'21 show that AMC faces numerous business challenges that are so far unaddressed, especially the high cash burn."
Unsurprisingly, short-seller Jim Chanos, who is betting on AMC (AMC) to fall, blasted the Apes for trading for "misguided reasons" and not seeing the risks in the company model or the high valuation.
"If you keep doing dumb things, if you keep saying, 'I'm a nihilist, I eat crayons, I don't care about this, I don't care about that,' well if you end up losing money, you only have yourself to blame," he said.
Retail interest rising: As AMC (AMC) devotees prepare to make another stand for the stock at the $30 level, there are few signs of a new big meme name on the cusp of unprecedented gains.
EV battery company Microvast (NASDAQ:MVST) has recently topped the mentions list for the WallStreetBets subreddit, according to Quiver Quantitative. But its moves, while big, have been choppy rather than straight up.
However, Morgan Stanley notes that retail investing interest is picking up recently, with a bias towards more buying.
"Retail participation is currently at 9.4% of the total market volume, which is in the 76th percentile relative to the last 5 years," Morgan Stanley's Quantitative Equity Strategy team writes. "Order imbalance has remained slightly positive. It currently sits at 0.6% or 62nd percentile relative to the last 5 years."
Real Estate (NYSEARCA:XLRE) and Health Care (NYSEARCA:XLV) have the biggest positive buy/sell imbalances among retail traders, so the next meme favorite could come from those sectors.
Materials (NYSEARCA:XLB) and Consumer Staples (NYSEARCA:XLP), also not readily associated with the retail crowd, have positive imbalances as well. Only Energy (NYSEARCA:XLE) and Industrials (NYSEARCA:XLI) are negative.
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