AMC Entertainment (NYSE: AMC) Stock: Buy or Sell?

AMC shares are currently trading near their all-time low, despite the fact that the company's fundamentals are at their strongest since the onset of the pandemic.

AMC Is Trading at an All-Time Low
AMC Entertainment (AMC) - would be classified as a penny stock right now if it weren't for the 1-for-10 reverse stock split that the company implemented at the end of August. In fact, if it hadn't been for the reverse split, AMC — which trades for around $6 — would be worth 69 cents per share today.

AMC reached an all-time high of $551 per share in 2021 (adjusted for the reverse stock split). However, the stock has experienced a significant decline in value since August. This decline can be attributed to the substantial dilution that resulted from the conversion of preferred shares into common stock.

This downward trend contrasts with the sustained high share price levels that AMC enjoyed over the past two years, supported by its loyal retail shareholders, affectionately referred to as the "Apes."

The technical indicators reveal significant selling pressure on AMC shares in recent months. The 14-day Relative Strength Index (RSI) reads 29, indicating oversold conditions. In such a situation, a reversal becomes more likely if a catalyst emerges to alleviate the selling pressure and propel the shares into a bullish trend.

AMC's Business Is in the Best Shape Since the Pandemic
Paradoxically, at the same time that AMC shares have sharply declined, the company has begun reporting its best financial results since 2019 — before the COVID pandemic.

For the third quarter, AMC disclosed record-breaking revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization), surpassing even pre-pandemic numbers. This success was attributed to the release of international blockbusters such as Barbie and Oppenheimer.

Despite a recorded 16% decrease in theater attendance compared to 2019, a remarkable 30% increase in per-patron spending significantly contributed to AMC's robust revenue results.

However, AMC still grapples with a substantial debt burden. The company's long-term debt stands at $4.75 billion, and its current ratio (total assets divided by total liabilities) is 0.46, raising some concerns.

The company's decision to raise equity to address this issue has been well-received. With the recent sale of $350 million worth of shares, AMC is poised to raise approximately $700 million this year. This infusion of capital will help strengthen its liquidity position, facilitate debt write-offs, and alleviate any short-term survival concerns.

Price Momentum
AMC is trading near the bottom of its 52-week range and below its 200-day simple moving average.

What does this mean?
Investors have been pushing the share price lower, and the stock still appears to have downward momentum. This is a neutral sign for the stock's future value.