Why AMC Entertainment Stock Popped (Again) Before Earnings

What happened

Movie theater chain owner and certified meme stock AMC Entertainment (NYSE:AMC) reports its Q4 earnings this evening. Analysts aren't optimistic (indeed, as you'll see, some are decidedly pessimistic) about its chances, forecasting a $3.61-per-share loss for the quarter on an 89% revenue decline -- but investors don't care.

They're bidding AMC shares up, and the stock has already risen 15.2% through 10:20 a.m. EST.

Image source: Getty Images.

So what

Not all investors are so enthusiastic, though. In fact, just hours before the report, analysts at independent equity research firm LightShed Partners released a sell rating for AMC stock this morning.

The "future of movie-going is not in doubt," opined the analyst in a note covered by TheFly.com. Once the pandemic goes away, folks will return to theaters to watch movies on the big screen. But the same may not be true for AMC.

"The future of AMC Theaters, however, is very much in doubt," warns the analyst, because AMC is "over-levered" with more than $11.3 billion in debt, cash poor, and unable to earn much more cash until people feel comfortable coming back to the theater.

Now what

Of course, that's probably what investors are betting on this morning. With coronavirus still in full swing, the chances of AMC reporting a profit this evening are vanishingly small. What might happen, though, is that management might say something optimistic about the future, something that might keep hope alive that AMC will survive, as opposed to just going bankrupt and then reorganizing itself to resume doing business once the pandemic has passed.

LightShed thinks that's the more likely scenario, I fear, and values AMC's chances of surviving the recession at no more than $0.01 per share.