What Are Penny Stocks?
The definition of the term penny stock is one trading for less than $5. Low prices are one of the biggest attractions when finding top penny stocks to buy. Whether the companies are start-ups or have fallen on hard times, there is plenty of reason that a company might see its shares trading at lower levels. The interesting part that some forget is that stocks under $5 aren’t nameless companies either.
Look at one of the most notable banks in the world, Credit Suisse (NYSE: CS). Earlier this year, CS stock was trading above $10. Fast-forward to the first week of October 2022, and share prices have imploded to lows of $3.70. Why is Credit Suisse stock down? Over the weekend, details emerged that the Swiss bank group tried to calm fears regarding its health. The event brought about jitters of a 2008 scenario and the breakdown of the financial system sending shares to all-time lows.
While drops like this don’t happen overnight, they show that penny stocks are more than just early-stage companies. You can view more popular brands that have become penny stocks in the article 10 Top Penny Stocks To Buy Under $5 That Are Household Names.
Best Penny Stocks To Buy
In some cases, even the cheapest stocks can go on to become market heavyweights. We saw it during the pandemic when Novavax (NASDAQ: NVAX) rallied from under $5 to over $300. Who could forget the epic rally that GameStop (NYSE: GME) had from under $3 to over $400 (split-adjusted to $120 now)? But thanks to the stock market crash in 2022, we’re not only seeing well-known companies drop. We’re also seeing former penny stocks revisit their roots.
Over the last few months, we’ve compiled articles discussing several companies that could be at risk of becoming penny stocks, including:
Interestingly, many have hit penny stock levels in recent weeks. With earnings season beginning, more economic data coming out, and a stock market sell-off in full force, some are wondering which company will come within striking distance of $5 next. Today we dive in and see why some traders ask, Will AMC Entertainment Holdings, Inc. (NYSE: AMC) Be On Your List Of Penny Stocks In 2022?
Will AMC Stock Join The List Of Penny Stocks?
There’s no shortage of interest in AMC stock, especially among retail traders. Reddit, Fintwit, and your average retail trader have likely heard about this entertainment company’s trading history.
Gamestop and AMC were the forerunners of the Ape movement thanks to their epic short squeezes. At one point in 2021, shares of the movie theatre stock traded as low as $1.91. They would ultimately rise to highs of $72.62 for a move of over 3,700% within a few months.
I won’t give you the entire history lesson on meme stocks or the Ape movement. But I will say that no matter what has happened since reaching those record highs, thousands of investors remain fixated on AMC. Meanwhile, the share price has steadily declined, even reaching fresh 52-week lows in the stock market today. Now that AMC stock is sitting around the $6.60 level, it’s less than $2 away from tapping that $5 penny stock threshold.
Last week AMC Entertainment announced entry into an equity distribution deal. It may offer up to 425 million of its AMC Preferred Equity Units. These units, also trading as APE stock, have completely died off since making their public debut in August. It reached a high of over $10 but sits well below $3 at the time this article was written.
AMC Stock Forecast
Considering the landscape for AMC stock, some may wonder what Wall Street thinks right now. Are analysts still bullish in the face of a 2022 stock market crash, are they leaning bearish heading into earnings, or are they hopeful with more optimistic expectations for the future of the stock? Here is what some firms see heading into the fourth quarter:
- Wedbush AMC Stock Forecast: Underperform rating, $1 price target
- MKM Partners AMC Stock Forecast: Sell, $0.50 price target
- Goldman Sachs Group AMC Stock Forecast: Neutral, $8.50 price target
- Citigroup AMC Stock Forecast: Sell, $1.25 price target
- B. Riley AMC Stock Forecast: Neutral, $2.75 price target
Among analysts, Goldman holds the most bullish price target on the former penny stock. Meanwhile, among the rest of the firms covering the company, the average price target for AMC stock is about $1.38.
Wedbush analyst Alicia Reese raised skepticism when APE shares were issued. “It was a nice way to get around their investors, who weren’t going to let them issue more shares to raise more cash. But investors understand that. Adam Aron does a great job marketing to them, but it was tough sell to sell that as gift.”
Is AMC Stock A Buy?
No analyst has given a Buy rating or equivalent to AMC stock thus far. With a muted tone in the stock market today, some are less concerned about the company’s long-term prospects and more focused on short-term trends. Whatever happens in the future with AMC or APE, these stocks have gained appeal for their dynamic in the stock market.
Yes, the overall trend in AMC stock is bearish. Shares are now trading 90% lower than they traded at the height of the 2021 breakout. Even with that as the case, daily trends continue prompting attention for high volatility traders, including “the Apes.”
One of the points of interest is AMC’s short interest. Outlets including Fintel.IO and TDAmeritrade put this figure somewhere around 19.4%. It isn’t the highest short float percentage out there right now. But it is something that traders have sunk their teeth into as a reason to keep AMC stock on their watch list.
But will AMC stock actually become a penny stock in 2022? Whether it’s investing in gold mining companies, issuing a new series of shares, or something else, AMC has the attention of retail traders in the stock market today. Looking at the forecast, only one analyst has pegged the stock in the $5+ territory. As Wedbush’s analyst suggested, however, dilution could become a sticking point for AMC Entertainment. If this is on your watch list right now, leave a comment about your outlook for the company and if you think it will become a penny stock or not in 2022.
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