Sometimes, the Reddit traders can seem irrational. This time around, however, they’re absolutely right to be bullish on AMC Entertainment (NYSE:AMC) stock.
There’s quarterly financial data to show that the company is working toward profitability.
Furthermore, the movie-theater chain is diligently working to reduce its debt. The company is also issuing a special dividend to sweeten the deal for loyal AMC stock investors.
You may have heard about AMC Entertainment’s fans, sometimes known as “apes.” They faithfully support AMC Entertainment Adam Aron and his mission to make the company profitable after struggling through the Covid-19 pandemic.
Maybe, there were apes on Reddit who pushed AMC stock too high, too fast last year during meme-stock mania. In 2022, however, the meme-stock trade is back and hopefully, a more sustainable price move is in store.
| AMC | AMC Entertainment | $22.46 |
What’s Happening with AMC Stock?
If the stock market is a weighing machine in the long term, then many meme stocks were weighed down by poor financials in early 2022.
Sentiment drove them to breathtaking heights, but there was a whole lot of room to retrace as the sugar rush wore off.
Such was the case with AMC stock, which blasted off to $60 during the summer of 2021, only to crash to $15 within a year.
Lately, though, the buyers are back and ready to rumble again. Perhaps the Reddit crowd is a little bit older and wiser this time around.
Hopefully, they’re looking at AMC Entertainment’s financials and not only considering the meme-trade potential.
They’re probably excited about the company’s announcement of a special dividend, though. This will be delivered in the form of preferred equity units, with the ticker symbol “APE.”
This special dividend isn’t just a gimmick, though.
“This new AMC Preferred Equity gives AMC a currency that can be used in the future to strengthen our balance sheet, including by paying down debt or raising fresh equity,” Aron said.
AMC Could Become Profitable
The Reddit traders should appreciate Aron’s creative strategy to raise capital for AMC Entertainment.
Along with that, the CEO recently expressed confidence that AMC Entertainment will “get on a path relatively soon to deleverage some more.” Presumably, Aron is referring to reducing the company’s debt load.
This isn’t just talk. AMC Entertainment bought back $72.5 million worth of debt for $50 million in cash during 2022’s second quarter.
Speaking of Q2 2022, AMC Entertainment took a giant leap toward profitability during that quarter. Specifically, the company reported a net earnings loss of $121.6 million. That’s a whole lot better than the $344 million net loss from the year-earlier quarter.
What You Can Do Now
Truly, you don’t have to be a Reddit trader or a meme-stock aficionado to root for AMC Entertainment. In time, this company could provide the ultimate post-pandemic comeback story, which everyone should be able to appreciate.
So, it’s possible that the Reddit traders are 100% right to buy up AMC stock in 2022. The CEO’s confidence and AMC’s improving financials should give the apes a reason to stay in the trade this time.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.