The AMC (NYSE: AMC) share price has been sliding over the past couple of weeks. The stock has fallen by 23% since the beginning of November. At the time of writing, it is changing hands at around $29, 53% below its June high of $63.
Still, despite this performance, the stock remains up by 620% over the past 12 months.
However, considering its performance in the past few weeks, it looks as if the AMC share price could slide back below $10 as the market sentiment towards the business quickly changes.
Changing sentiment
Shares in the cinema group jumped earlier this year when the company became the target of so-called Reddit, or meme, traders. These traders pushed the stock up from a price of less than $2 at the beginning of the year, to a multi-year high of $63 in the relatively short space of six months.
The stock charged higher even though the company’s underlying business performance remained relatively depressed. The one action the corporation did take was to raise new funds from shareholders to pay down debt and cover operating losses.
As I have written in the past, this strategy did make a lot of sense. By raising money to improve its balance sheet, the quality of the business will improve, which would justify a higher share price.
Unfortunately, it is becoming harder for the company to issue new shares with the stock falling. This risks a potential downward spiral. If the business is struggling to reduce debt, market confidence will weaken. This will push the stock lower and make it harder for the firm to raise money.
These factors could be one of the reasons behind the AMC share price decline. Another reason could be management’s recent spate of stock sales. The company’s CEO offloaded $10m of shares this week, taking total management share sales this year to nearly $100m.
AMC share price outlook
When management is selling, it hardly inspires confidence in the rest of the market. After all, management should have a better understanding of the business than any outside investors. If they are selling, it may be because they think the stock is overvalued.
All of the above could have an impact on sentiment towards the AMC share price. On the positive side of the equation, the reopening of the US economy is pushing revenues higher. Revenues increased 540% in the fourth quarter, and the company’s losses declined by 80% year-on-year. If this trend continues, AMC’s outlook will improve, and that may help improve investor sentiment.
Nevertheless, I think it is likely that in the near term, the AMC share price will continue to decline as investor sentiment shifts. The stock might not fall back to $10 if revenues continue to improve, but there is no telling when the selling will stop if management continues to sell its stakes.
As such, I am no longer interested in buying the share for my portfolio. I would avoid the stock.
