Shares of AMC (ticker: AMC) were up 18% to $56.50 in midday trading. Its meme stock mate, GameStop (GME), was up 11% to $275.75. BlackBerry (BB) and Workhorse (WKHS), which are also popular stocks on social media sites, were up 14% and 11%, respectively.
The stock’s ascent on Monday—and, for that matter, its breather on Friday—can’t be explained by any fundamental news. Regulatory filings after Friday’s close did show that six executives cashed in on last week’s rally by selling shares on Thursday, but that’s not surprising.
Meme stocks like AMC and GameStop are influenced by plenty of technical factors, including high short interest, aggressive call options, online chatter—by small investors who don’t like Wall Street—and momentum trading.
Last week’s action didn’t scare short sellers away. Ihor Dusaniwsky, managing director at short-selling analytics firm S3 Partners, estimates that AMC ended the week with 88.2 million shares shorted, or about 17.7% of shares available for trading. Dusaniwsky estimates short sellers covered about 796,000 shares worth $41 million over the 30 day period that ended on Friday.
“We have seen AMC short covering this week, but by no means are we seeing a wholesale short squeeze in this stock at the moment,” Dusaniwsky wrote in an email late Friday evening.
Dusaniwsky notes that short sellers were down $3.91 billion in year-to-date on their bearish bets through Friday’s close, though they were up about $302 million on Friday’s 6.7% decline.
Though it’s tough to point to fundamentals when describing AMC’s rally, there are some positive signs for theater business. B. Riley analyst Eric Wold, who was bullish on AMC before the latest surge, still expects a rebound in the exhibition industry to keep going, even if such a return is more than priced in to AMC stock. Wold thinks AMC has done a good job raising cash by selling stock and capitalizing on its meme-stock popularity. He thinks the company has built a strategic cash war chest.
“In addition to our continued expectation that AMC could improve its balance sheet and future cash flows through debt repurchases/pay-downs, we could now see either acquisitions of smaller exhibitor chains or the takeover of leases from troubled chains (that should avoid any DOJ market share review issues),” Wold wrote on Monday.
Though Wold has a Neutral rating on AMC with a $16 price target, he still has Buy ratings on Cinemark Holdaings (CNK), IMAX (IMAX), Marcus (MCS), and National CineMedia (NCMI). He notes that distribution deals between studios and theater chains over the past year will allow strong films to maintain traditional exclusive theatrical release windows, while providing more options for poor performing films to hit streaming services earlier, freeing up screens for the big ticket films.
Article originally published by Barron’s