Entertainment group AMC Entertainment (NYSE: AMC) has had some ups and downs in recent years. After a meteoric rise in 2021 fueled by the meme stock craze, the company’s stock price has dropped significantly. But with recent box office success and renewed enthusiasm in the meme stock market, investors are wondering: Is AMC stock rising again?

Business

The entertainment industry, heavily impacted by pandemic restrictions and the dominance of streaming services, is showing initial signs of recovery. Summer blockbusters and a slew of post-pandemic releases have brought audiences back to the large screen, providing a much-needed revenue boost.

However, the main problem remains the financial condition. To stay afloat, the company took on significant debt during the pandemic. Although steps have been taken to reduce this problem through stock offerings, the burden is still significant. This debt limits the ability to invest in modernization and fresh technologies, which in the long run may be crucial for attracting customers in a competitive environment.

Interestingly, a discounted cash flow calculation suggests that the share price may be undervalued by as much as 56%. However, with such a decline from the peak, I fully understand why the market would be hesitant to trust any single indicator when making decisions.

In fact, the business is still unprofitable. As this situation is unlikely to change anytime soon, the share price could see further declines unless the events of 2021 repeat themselves.

The influence of memes

The meme stock phenomenon of 2021, where retail investors banded together to drive up stock prices, played a significant role in AMC’s history. While this provided a much-needed financial boost, it also led to high volatility and a mismatch between the share price and the company’s fundamentals. This volatility continues to make it a risky investment, as conventional metrics such as the price-to-sales (P/S) ratio appear to be less vital to some.

Along with Keith Gill, one of the key players in 2021 Pausing games craze that has returned to the public eye, meme stocks have seen huge gains over the past few days. Many are now down significantly, but volatility is certainly back on the menu.

Next move

As we learned in 2021, the next move of these stocks is almost impossible to predict. There can be acute increases, but the declines can be just as aggressive. Clearly, the company itself is in trouble, but the influence of online communities on share price movements is a completely different matter.

For me, I don’t want to touch AMC stock. I clearly remember the madness and chaos of 2021, and while many investors will make it with a bit of luck, I don’t want to fall into the trap of chasing the upside and potentially only seeing the downside.