Global theater chain AMC Entertainment Holdings Inc. (NYSE:AMC) celebrated e-commerce giant Amazon.com’s (NASDAQ:AMZN) plans to invest up to $1 billion annually in movie theatrical releases. The news pushed the AMC stock up 9.2% in intraday trading on November 23.
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Amazon’s plan was welcomed with enthusiasm by all cinema stocks as theaters struggle to attract more viewers amidst the competition from online streaming channels. Yesterday, Cinemark Holdings (NYSE:CNK) gained 12.6%, while Imax Corp. (NYSE:IMAX) gained 9.2%.
Importantly, sources say that Amazon plans to release between 12 to 15 movies per year, gradually gaining strength starting in 2023.
AMC, a meme stock favorite, has been swinging wildly owing to traders’ speculative bets. Year to date, AMC stock has lost 53.1% versus gaining 19.8% in the past six months. Moreover, the stock has lost 20.3% in the past three months while gaining over 3.2% in the past five trading days.
Is AMC a Good Stock to Buy Now?
AMC is trading at a price/sales (P/S) multiple of 0.92x, which is lower than both its five-year historical average of 2.42x as well as the sector median of 1.27x. This makes AMC’s stock currently undervalued and an interesting investment opportunity.
Despite the cheap valuation, analysts prefer to steer clear of meme stocks. On TipRanks, AMC stock has a Moderate Sell consensus rating based on two Buys versus three Sells. The average AMC Entertainment Holdings price forecast of $2.80 implies a massive 63.4% downside potential to current levels.
