Is AMC Entertainment Holdings, Inc. (AMC) the Worst Communication Services Stock to Buy According to Short Sellers?

We recently compiled a list of the 10 Worst Communication Services Stocks to Buy According to Short Sellers. In this article, we are going to take a look at where AMC Entertainment Holdings, Inc. (NYSE:AMC) stands against the other communication services stocks.

Artificial intelligence (AI) and automation are 2 of the most transformative and consequential technologies that are expected to impact telecommunications since the advent of 5G. Integration of AI into networks and operations should help in optimizing performance, automating tasks, and improving customer service. Well-established telecom companies continue to leverage AI-powered predictive analytics to track and project maintenance works so that network reliability and efficiency are maintained.

As a result of the expansion of the 5th-generation mobile network (5G), a range of telecommunication providers continue to deliver faster data speeds and greater network capacity. Wi-Fi technology pioneer Qualcomm expects that 5G should be responsible for supporting more than $13 trillion in global economic output by 2035.

As per Infopulse, in 2021, the global telecom IoT market size was pegged at $19 billion. By 2031, this should exceed the $185.5 billion mark, exhibiting a CAGR of 27.71%. One critical use case, which explains why IoT is getting traction in the sector, incorporates equipment monitoring and hazard detection.

In 2024, political ad spending is expected to be in the range of $10.2 billion and $12 billion (as per Basis Technologies). These numbers exhibit a rise of 13%-30% from the 2019-2020 election cycle. For advertising and media agencies, this can result in higher CPMs—primarily during certain periods, certain locations, and on certain channels.

Expansion of 5G Technology and Plans for 6G

5G will be more scalable and capable of handling bigger data loads, therefore, it is associated with the Internet of Things (IoT). 5G can also support advanced technologies like augmented reality (AR) and virtual reality (VR). The Wi-Fi technology pioneer believes that the development requirements of the new 5G network should expand beyond the traditional mobile networking players to segments like the automotive industry. Experts believe that the 5G value chain (which includes OEMs, operators, content creators, and the like) might support up to 22.8 million jobs, or over one job for every person in Beijing, China.

The stage is being set for the 6^th generation (6G). This technology is expected to incorporate AI at the edge and in networks fully, allow reliable operation of autonomous vehicles, and automation in industrial manufacturing, and should power “smart factories.” 6G should take extended reality (XR) to brand new levels and will allow lightweight devices which can be deployed at a similar scale as today’s smartphones. Emerging capabilities such as digitization of multisensory aspects (like human senses of touch, smell, sight, and taste), improved sensor fusion and brain-computer interface should help deliver hyper-realistic experiences (such as holographic teleportation).

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While 5G established a technical foundation for high-performance industrial IoT, 6G is expected to unleash the full potential of next-gen robotics, such as delivery robots, service robots, and autonomous and collaborative robots.

Communication service providers (CSPs) should start realizing the value of highly-touted 5G use cases like vehicle-to-vehicle communication, and virtual reality-based immersive metaverse networking. One of the most promising cases for CSPs is Wi-Fi upgrade—from broadband to fixed wireless access and private 5G. The use cases of 5G and operational automation will rely on CSPs’ ability to create cloud-native network platforms with end-to-end programmability.

GenAI Revolution

The global unified communications market was pegged at US$63.82 billion in 2023 and should compound at 12.70% between 2024 – 2032 (as per Polaris Market Research). This growth should stem from strong growth because of the increased usage of mobile devices and the adoption of Bring Your Device (BYOD) policies. Enhancing enterprise communication for improved productivity and cloud-based unified communication should also act as growth enablers.

Generative AI is expected to drive a seismic shift in the communication services transformation agenda. Efficiency, cost-effectiveness, improved IT services, data-driven intelligence, and network connectivity should act as the backbone of GenAI-propelled customer experience.

The communications and media companies’ top AI objectives in 2024 should optimize network performance and reduce downtime. Collectively, these are expected to improve the quality of service. These companies are planning to deploy AI for real-time detection of and response to network issues. This will help in the rollout of high-bandwidth, low-latency applications, and services. Artificial intelligence helps in driving predictive analytics which facilitates detecting and resolving network issues before the service disruption.

With more and more computing workloads being distributed throughout remote data centers, latency is expected to drop, bandwidth should increase, and organizations are expected to gain more sovereignty over their data. Edge computing enables real-time data processing, which should unlock use cases across industries— ranging from remote healthcare treatment and remote management of mining operations to sustainability solutions including smart grids optimizing energy consumption.

Our methodology

To list the 10 Worst Communication Services Stocks to Buy According to Short Sellers, we used the Finviz screener to filter out stocks catering to the broader communications sector. Next, we narrowed our list of stocks by selecting the ones having high short interest. Finally, the stocks were ranked in ascending order of their short interest.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

An audience of moviegoers inside a theatre, savoring the latest cinematic experience.

AMC Entertainment Holdings, Inc. (NYSE:AMC)

Short % of Float (15 August 2024): 14.22%

Number of Hedge Fund Holders: 19

AMC Entertainment Holdings, Inc. (NYSE:AMC) is involved in the theatrical exhibition business. The company owns, operates, or has interests in theatres which are located in the United States and Europe.

In the mid of August 2023, AMC Entertainment Holdings, Inc. (NYSE:AMC) got hit with a class-action lawsuit on behalf of preferred shareholders challenging its stock conversion plan. This came after the company ended a bruising legal fight with different investors. The company got court approval regarding the settlement of a class action lawsuit by holders of its common stock. This paved the way for the company to convert its preferred stock (APEs) to common shares. The company then mentioned that the conversion plan was critical to strengthen its finances.

However, in May 2024, a pension fund and the company’s investor defended a settlement they negotiated with AMC Entertainment Holdings, Inc. (NYSE:AMC) so it could go ahead with the stock conversion being opposed. One of the retail traders is asking Delaware Supreme Court to reverse the settlement which was approved in August 2023 by a lower court. This investor alleged that the pension fund and the individual investor colluded with AMC Entertainment Holdings, Inc. (NYSE:AMC) to dilute meme stock investors in the conversion of preferred equity units into common stock, reported Bloomberg. The investor’s attorney, Anthony Rickey of Margrave Law LLC, highlighted that the conversion has left some shareholders destitute.

The reversal of the order will offer these shareholders hope for recovery from the defendants who did wrong to them.

However, Wall Street analysts and market experts believe that the stock holds strong growth potential over the long term, considering its well-diversified theater experience and loyalty program. AMC Entertainment Holdings, Inc. (NYSE:AMC) provides a loyalty program called AMC Stubs. This includes several tiers with varying benefits, like free upgrades on concessions and reward points. As a result, this is expected to help the company enhance customer loyalty and repeat business.

Moreover, the company’s subscription service, AMC Stubs A-List, provides steady revenue visibility for the long term. AMC Entertainment Holdings, Inc. (NYSE:AMC)’s partnerships with film studios and distributors should act as a competitive advantage, which should help it achieve revenue and earnings growth. For example, its recent alliance with REI to showcase outdoor-themed short films provides a strong opportunity for cross-promotions.

On 12^th August, Morgan Stanley gave the price target of $10.00 on the shares of AMC Entertainment Holdings, Inc. (NYSE:AMC). As per Insider Monkey’s database, 19 hedge funds reported owning stakes in the company, up from 17 in the preceding quarter.

Overall AMC ranks 7th on our list of the worst communication stocks to buy according to short sellers. While we acknowledge the potential of AMC as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than AMC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.