AMC Entertainment Holdings, Inc. (AMC) Is a Trending Stock: Facts to Know Before Betting on It

• AMC
  +0.93%

AMC Entertainment (AMC) has recently been on Zacks.com’s list of the most searched stocks. Therefore, you might want to consider some of the key factors that could influence the stock’s performance in the near future.

Over the past month, shares of this movie theater operator have returned +5.9%, compared to the Zacks S&P 500 composite’s -1.3% change. During this period, the Zacks Leisure and Recreation Services industry, which AMC Entertainment falls in, has lost 12.7%. The key question now is: What could be the stock’s future direction?

While media releases or rumors about a substantial change in a company’s business prospects usually make its stock ‘trending’ and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.

Earnings Estimate Revisions

Rather than focusing on anything else, we at Zacks prioritize evaluating the change in a company’s earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.

Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock’s fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

For the current quarter, AMC Entertainment is expected to post a loss of $0.01 per share, indicating a change of +95.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +76.2% over the last 30 days.

The consensus earnings estimate of -$0.22 for the current fiscal year indicates a year-over-year change of +77.1%. This estimate has remained unchanged over the last 30 days.

For the next fiscal year, the consensus earnings estimate of $0.04 indicates a change of +84.1% from what AMC Entertainment is expected to report a year ago. Over the past month, the estimate has changed -39.1%.

Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock’s price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, AMC Entertainment is rated Zacks Rank #3 (Hold).