AMC (NYSE: AMC) inventory has been on fairly the roller-coaster experience. From the dizzying heights of 2021 to the stomach-churning plunge of the previous 12 months, shareholders within the cinema chain that grew to become the darling of meme inventory buyers have skilled extra drama than a summer time blockbuster.

What occurred?

Let’s set the scene: the shares have tumbled a jaw-dropping 85% over the previous 12 months. The corporate that when commanded a market cap bigger than many established blue-chip gamers now sits at a comparatively modest $2bn valuation.

The corporate’s story is one among survival in opposition to the percentages. When the pandemic shuttered cinemas worldwide, many thought it was curtains. However then got here the meme inventory frenzy, a plot twist worthy of any film on the large display screen. Retail buyers, many armed with stimulus checks, and a penchant for nostalgia, piled into AMC inventory, sending it to astronomical heights.

Nevertheless, as with many sequels, the follow-up efficiency has been lower than stellar. The corporate’s fundamentals inform a sobering story: adverse shareholders’ fairness, excessive volatility, and no profitability in sight for the subsequent three years.

A restoration in sight?

Nevertheless, I really feel there’s nonetheless a glimmer of hope on this gloomy narrative. Income is exhibiting indicators of life, with $4.81bn within the final 12 months, an honest 11% rise. The massive query is: can they flip this income into revenue in the long run?

No dialogue right here could be full with out mentioning two co-stars: debt and share dilution. With an enormous debt-to-equity ratio of -223.7%, the enterprise is carrying a tremendously heavy debt load. And let’s not neglect the substantial dilution shareholders have confronted, with the variety of shares excellent rising by a whopping 132% within the final 12 months alone.

But, CEO Adam Aron continues to seek out new methods to maintain buyers engaged. From accepting cryptocurrency, to investing in gold mines and branching into popcorn gross sales, administration have proven that nothing is off the desk.

By no means a boring watch

So, what’s the subsequent act? The corporate is buying and selling at a 43.9% low cost to a discounted money stream (DCF) estimate of its truthful worth, which could tempt worth buyers. However bear in mind, simply because one thing’s on sale doesn’t imply it’s a cut price. Administration must show it could translate income into revenue, and handle that debt load earlier than it turns into a feel-good comeback story.

The cinema business itself faces huge challenges. Streaming companies are the large unhealthy wolf on the door, and the corporate must persuade movie-goers that the large display screen expertise is value leaving the consolation of their sofas.

So for me, the story surrounding AMC inventory is much from over. It could possibly be a phoenix rising from the ashes or a cautionary story of market exuberance. Both approach, it guarantees to be a gripping final result. However I need my cash to be rising, not entertaining me. For that cause, I’ll be avoiding this one for now.