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Finance

Will Reddit’s ‘Poor Man’s Tesla’ Reach the Moon?

AMC Entertainment stock rose a whopping 35 percent on May 27 and hit a new 52-week high. It’s a meme stock that has hit a new high after the short squeeze in the first quarter of 2021. Most other Reddit stocks including GameStop, Sundial Growers, and Zomedica are trading way below their 52-week highs. What’s the forecast for AMC stock in 2021? Will it rise more or crash badly?

There has been a rally in all meme stocks this week. However, the gains in AMC far outpace the other meme stocks including the Reddit favorite GameStop, which is still only about half of its previous highs.

Tesla

Tesla is another stock that went to the moon literally and at its peak, it had a market capitalization of almost $900 billion, which far exceeded all of the leading automakers put together. SpaceX, one of Elon Musk’s privately held companies, is actually attempting to take people to the moon. It’s also accepting Dogecoins for the moon mission called “DOGE-1 Mission to the Moon.”

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There are some similarities between Tesla and AMC Entertainment. Both of them seem to trade at odds with their fundamental valuations. Also, in the most recent earnings call, AMC Entertainment CEO Adam Aron harped on the fact that it’s largely owned by retail investors now. In the past, Chinese billionaire Wang Jianlin’s Dalian Wanda Group Co. was the major shareholder.

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However, the group has cashed out of AMC Entertainment at a profit thanks to the Reddit-driven rally. AMC Entertainment raised capital by selling shares and capitalized on the short squeeze driven rally.

Tesla is among the rare companies that speak directly to retail shareholders during the earnings call. Musk thinks that retail traders have a better understanding of Tesla stock than the Wall Street pros, some of whom he has mocked during the earnings call.

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AMC stock appears to be in a bubble

AMC stock looks like it’s in a bubble. To justify its valuations, AMC might need to post earnings higher than its previous highs. That looks remote if not outright impossible. However, with retail traders dabbling with the stock, it looks like the “greater fool” theory at play. When the euphoria dies, a lot of retail traders could end up holding AMC stock. The stock might not turn green in their portfolios for years.

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Can Aron turn AMC Entertainment into a “poor man’s Tesla?” It’s certainly a possibility given the euphoria towards the stock. But then, Tesla at least has a story to sell with the autonomous driving and robotaxis, which Musk and several bullish analysts think will drive long-term value.

AMC is a cinema chain company that’s grappling with the threat from streaming companies. I don’t really see a compelling selling story behind the stock, at least at these prices.


View more information: https://marketrealist.com/p/amc-stock-forecast-reddit/

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