When AMC Entertainment (NYSE: AMC) surged by nearly 40% last week, the stock issuance news should have sunk the stock. AMC sold 43 million shares and raised $428 million from it.
The stock sale hurts shareholders by diluting the holdings. Thankfully, debt holders are not harmed by the offering. This suggests the debt is a better investment than the stock.
Speculators are betting that streaming services will lose subscribers after the U.S. contains the COVID-19 pandemic. Vaccination will reduce the risk of severe cases, enough to reopen restaurants, bars, offices, and movie theatres (at increased capacity).
AMC is relatively inexpensive compared to Roku and other streaming services. Yet the better value is AMC Networks (NASDAQ:AMCX) posted non-GAAP EPS of $2.98. Revenue fell only slightly by 5.8%, to $691.47 million.
AMC stock has enormous debt, negative cash flow, and consistently increasing stock dilution. Conversely, AMCX stock will rise from at least nine million paid subscribers by the end of 2021. AMCX is pivoting. It will become a worldwide leader in streaming. Higher viewer engagement and pricing power are just two metrics that support its upside ahead.
The short float of 22.65% on AMCX stock suggests another short squeeze ahead. Consider this stock for its low valuations and strong prospects ahead.
