AMC Entertainment Holdings (NYSE:AMC) surged in share price by 38% this week after everyone’s favourite meme stock received a favourable court ruling. AMC stock had been trying to stock a stock conversion plan that could dilute investors’ holdings. On Monday, the court ruled in AMC stock’s favour.
What happened?
AMC stock warned investors earlier this year that the company was burning through cash “at an unsustainable rate,” and this could lead to bankruptcy. In response, it suggested selling more shares, enabling it pay down its US$5.1 billion in debt.
However, a Delaware court judge declined the proposal, which would have seen AMC stock potentially convert preferred stock to common stock, against the wishes of common stockholders. AMC stock has since filed a revised petition for the stock conversion plan.
AMC stock became renowned when shares surged during the pandemic, as meme stocks gained popularity. It seems meme traders haven’t forgotten the stock, with its common shares surging on the news, while preferred shares fell 3.7%.
Does it relate to Cineplex stock?
With AMC stock surging in share price, investors might be wondering whether this means Cineplex (TSX:CGX) will climb in price as well. In short, not likely. While other meme stocks gained traction from the news, it seems this might just be another short squeeze, with shares coming back down yet again.
In fact, after climbing that 38% on Monday, shares on Tuesday were down by almost 12% at the time of writing. This comes even as hyped-up films such as Barbie and Oppenheimer hit theatres to enormous crowds — the highest seen since pre-pandemic!
Cineplex stock hasn’t had anywhere near these kinds of results, with shares still down by 20% in the last year alone. Yet analysts believe there could be some major wins coming for the stock.
Back to pre-pandemic levels
Revenues for theatres across the world have increased, with Cineplex stock seeing revenue rise 121% higher in the first half of 2023 compared to the same time in 2019. One major revenue source has been a focus on international movies, generating revenue above the rest of the industry.
June box office levels were still quite positive, which didn’t include the “Barbenheimmer” phenomenon. Revenue came in at $56 million, which was 98% of box office revenue for June 2019. In the second quarter of 2023, its box office revenue was 87% of the same period of 2019, which actually outpaced the rest of the North American box office recovery “by more than 500 basis points,” Cineplex stock stated.
With this recent push for moviegoers, there could be a push upward in share price as well. And it’s one that analysts believe is overdue given the company’s positive performance. So, while shares remain at around $9, there could be a potential upside of 36% to reach 52-week highs — and even more, if we see share prices return to pre-pandemic norms. Only time will tell, so grab your popcorn to watch the show.
