AMC Stock: Taylor Swift Movie Could Trigger Short Squeeze
It may seem crazy, but there’s a growing body of evidence to suggest that the ‘Taylor Swift Effect’ could potentially usher in a new era for AMC stock.
Just like “The Messi Effect” transformed the value of the Inter Miami franchise in Major League Soccer, it’s possible that Taylor Swift could save AMC Entertainment and give it a massive stamp of approval.
Traditionally, the stock market is influenced by factors like economic data, corporate earnings, and geopolitical events. However, in an age where social media and fan engagement are becoming increasingly important, the influence of celebrities, particularly those with massive followings like Taylor Swift, can’t be overlooked.
Taylor Swift’s ability to galvanize her fans, affectionately known as ‘Swifties’, could make a significant impact on AMC’s stock prices. The power of the Taylor Swift effect, driven by the unwavering support and dedication of her fanbase, can potentially trigger a short squeeze, sending AMC shares skyrocketing.
The Eras Film: What It Is and Why It Matters for AMC Shareholders
“The Eras” movie is a project from global pop sensation, Taylor Swift. It’s a cinematic journey through all her past eras, marking each milestone of her illustrious career.
The project has been creating a lot of buzz in the entertainment world and has even started to ripple through the financial markets.
“The Eras” Advance Ticket Sales marks a major event for AMC Entertainment Holdings Inc., one of the world’s largest theatrical exhibition companies, to boost its revenue, improve profit margins, generate more net income, and pay off its crippling long-term debts.
The release of The Eras Film could prove to be a lifeline for the company. The massive global fanbase of Taylor Swift could potentially translate into a surge in theater visits, bolstering AMC’s financial health.
For AMC shareholders, the release of the film is a potentially significant event. A surge in ticket sales could boost the company’s bottom line, leading to an uptick in its stock prices. This could provide a golden opportunity for investors holding AMC shares.
Analyzing the Potential Financial Impact of the Eras Film Release
It’s no secret that the entertainment industry has significant influence over the stock market, particularly movie theaters like AMC. The release of highly anticipated movies often drives up ticket sales, which in turn can lead to a surge in AMC’s share prices. So, how does this connect with Taylor Swift’s Eras Film? Let’s dive in.
Taylor Swift, with her massive global fan base, has a unique ability to drive fan engagement to unprecedented levels. Her Eras Film is expected to attract millions of her fans to theaters. AMC Theatres reported $27 million in ticket sales revenue during the first day of preorders.
Full Details on Taylor Swift’s Deal with AMC
AMC CEO Adam Aron and Taylor Swift’s parents (her management team) struck a unique deal that sidestepped Hollywood Studios and increased profits for both parties.
Hollywood Studios are “extremely pissed off” to learn that Taylor Swift flipped the game on them and could release a widely anticipated film without the help of a 3rd party.
According to Collider, AMC will receive 43% of the box office revenue, leaving the remaining 57% for Swift. These tickets are competitively priced at $19.89 for adult tickets and $13.13 for children and seniors.
The movie is scheduled to be screened in over 1,000 theaters across the United States, including AMC, Cinemark, and Regal locations.
Each AMC cinema in the country will offer four daily screenings from Thursdays to Sundays giving audiences plenty of opportunities to secure their comfortable cinema seats and enjoy this much-anticipated film.
Furthermore, both parties have agreed to allow cinemas to showcase the film for a duration of up to 26 weeks, setting the stage for substantial financial gains for both parties involved.
Projected AMC Revenue from Taylor Swift’s The Eras Film
Analysts estimate that AMC will generate $100 million in revenue, but I believe those numbers are far too conservative. I estimate AMC could profit as much as $500 million from the film plus extra revenue from its role as the sole movie distributor to other movie theatres throughout the world.
| Revenue Source | Revenue |
|---|---|
| Ticket Sales | $1 billion |
| Concessions | $200 million |
| Distribution Deals | $100 million |
| Total Net Income Potential | $559 million |
Moreover, the Eras Film release is unique in that it’s not just about the movie itself, but also about the social phenomenon that Taylor Swift represents. This social impact can create a ripple effect, driving even more people to watch the movie and buy AMC shares, thereby increasing AMC stock prices and triggering a short squeeze and gamma squeeze.
Understanding the AMC Short Squeeze and How It Works
AMC’s short interest is around 12% with just over 25 million shares sold short.
A short squeeze is a rapid surge in the price of a stock, primarily triggered by an excess amount of short selling. The term ‘short selling’ refers to the selling of stocks that the sellers do not actually own, with the intention to buy them back at a lower price.
However, if the price of the stock rises instead of falling, these sellers find themselves in a tough spot, and are forced to buy back the stock to cover their losses, leading to a further surge in its price.
This is essentially what a ‘short squeeze’ is. It’s a phenomenon that can result in skyrocketing prices, and it has the potential to make a significant impact on a company’s stock.
AMC Entertainment witnessed this phenomenon firsthand in early 2021 when its stock value skyrocketed from just $2 in January to a peak of $72 in June (pre-split prices). This steep rise in stock price was largely driven by retail investors, particularly those on the Reddit community r/WallStreetBets, who banded together to drive up the price of heavily shorted stocks, such as AMC and GameStop.
Investors involved in short selling bet against the success of these companies, expecting their stock prices to fall. However, when retail investors began buying up shares and refusing to sell, the short sellers were caught in a ‘short squeeze’. They were forced to buy back the stocks at a higher price, thereby driving the price even further up.
Q3 2023 Earnings could be explosive once the company reports on its “Barbie” movie revenue plus the financial impact from the Taylor Swift deal.
AMC shares could short squeeze after Q3 earnings or even leading up to the October 13th movie premiered based on hype and excitement alone.
In essence, the short squeeze is a powerful tool in the hands of retail investors, capable of shaking up the stock market and turning the tables on large investors betting against a company’s success.
It’s a phenomenon that has not only shaped the narrative of AMC’s stock in 2021 but also has the potential to shape its future, particularly if the Taylor Swift effect comes into play.
Predicting the Future of AMC Stock: Will the Taylor Swift Effect Continue?
As we turn our gaze towards the future of AMC’s stock, a key question arises: Will the Taylor Swift Effect continue to influence its direction? While it’s impossible to predict the course of the stock market with absolute certainty, there are several factors that may suggest a continued impact due to Taylor Swift’s influence.
- Higher Gross and Net Profit Margins: While AMC turned a profit in Q2 2023, the company achieved a profit margin of less than 1%. Future distribution deals could transform AMC from struggling movie theatre into a highly profitable entertainment distribution company.
- More Direct Deals with Celebrities and Filmmakers: Cutting out Hollywood from film distribution could be a lucrative business model moving forward. AMC will generate much higher gross margins and add a lot more net income to its bottom line. Less is more.
- Growing Loyal Fanbase: Habits are contagious and Taylor Swift’s film could revive interest in traditional movie theatres during the age of on-demand streaming content.
Risk Factors
Given these considerations, it’s prudent for investors to approach the future of AMC’s stock with cautious optimism. The Taylor Swift Effect offers exciting potential for driving the stock’s value upward, but it shouldn’t be the sole basis for investment decisions.
There are several risk factors to consider before investing in AMC stock:
- Share Dilution: AMC may sell up to 353 million additional shares as part of the agreement during the APE share conversion and reverse stock split. The company has $4 billion in long term debt and must tackle it in order to survive.
- Sluggish September: September is the worst performing month for stocks and AMC shares could remain sluggish during a potential September bear market.
- Naked Short Sellers: Naked short selling puts a lot of downward selling pressure on AMC stock since synthetic shares get created and sold out of nowhere.
- Covid Lockdowns: The Covid Eris strain has caused a spike in hospitalization nd could deter people from gathering in crowded indoor plaes such as movie theaters.
- Taylor Swift Effect Fades Away: Will the Taylor Swift hype fade away? Not likely but perhaps Swifties don’t rush into the theatre as much as AMC shareholders hope for.
Best Strategies for Investors to Profit from The Taylor Swift Effect
As an investor, cashing in on the Taylor Swift Effect and the potential AMC short squeeze requires a strategic approach.
Buying AMC shares on the NYSE through a good stock trading platform is the easiest way to profit from the Taylor Swift effect. I opened a long position of 100 shares as a starting point and may add more to my position leading up to the October 13th, 2023 opening date.
You can also buy AMC call options to profit from sharp movements in the stock. I opened multiple call options contracts expiring on 10/13 at a strike price of $27.
Other attractive expiration dates are 10/20, December, and April 2024.
Action Steps for AMC Investors
Here are some strategies you can consider:
Stay Informed
First and foremost, it’s crucial to stay updated on market trends and the latest news about AMC and Taylor Swift. Regularly monitoring social media platforms and financial news outlets will keep you abreast of any significant developments. Remember, the stock market is often reactive, and being ahead of the curve can give you a decisive advantage.
Diversify Your Portfolio
While it’s tempting to go all-in on a promising opportunity like this, remember the golden rule of investing: diversify your portfolio. Even if AMC shares are experiencing an upswing thanks to the Taylor Swift effect, it’s crucial to have investments in other sectors to mitigate potential risks.
Assess Your Risk Tolerance
Every investment comes with its share of risk. Before plunging into AMC stock, evaluate your risk tolerance. Are you comfortable with the possibility of a significant loss for the chance of a higher return? This self-evaluation can help guide your investing decisions.
Consider the Long-Term Potential
While short-term gains can be exciting, also consider the long-term potential of AMC. Will the Taylor Swift effect have a lasting impact on the company’s performance? Will AMC be able to capitalize on this popularity and sustain growth in the future? These are essential questions to ponder before making your investment decision.
Investing in stocks is never a guaranteed win, but with careful planning and strategic moves, you can potentially capitalize on the Taylor Swift effect and the AMC short squeeze. Remember, the key to successful investing is patience, research, and calculated decision-making.
