AMC Entertainment Holdings, Inc. (AMC) shares fell more than 8% during Tuesday's session after third quarter guidance came in well below consensus estimates.

Key Takeaways

  • AMC shares moved sharply lower during Tuesday's session after third quarter guidance came in well below consensus estimates.
  • The company expects third quarter revenue of $119.5 million, which is below consensus estimates of $155.3 million, and announced the sale of up to 15 million common shares.
  • The stock remains in a bearish downtrend judging by the moving average convergence divergence (MACD), but the relative strength index (RSI) suggests that it could see some near-term consolidation before resuming any move lower.

AMC expects third quarter revenue of $119.5 million, which is below consensus estimates of $155.3 million. While cash and equivalents hit $417.9 million, the company entered into an equity distribution agreement to sell up to 15 million common shares. Operating costs and expenses are projected to be between $584.4 million and $604.4 million.

A public company's guidance is its report to shareholders on the earnings it expects to achieve in the quarter or fiscal year ahead. Alternatively referred to as earnings guidance or a forward-looking statement, the report typically includes revenue estimates, projected earnings, and capital spending estimates.

Earlier this week, AMC announced the reopening of theaters in New York, which marks a "monumental step" in the right direction, according to CEO Adam Aron. Movie studios have been hesitant to release blockbuster films until key major markets are open – in fact, some of them have released films directly to streaming platforms, with mixed success.

Chart showing the share price performance of AMC Entertainment Holdings, Inc. (AMC)
TradingView.com

From a technical standpoint, AMC stock moved off of its reaction highs toward its prior lows of $2.66. The RSI is near oversold territory with a reading of 33.24, but the MACD remains in its downward trend that began in early September. These indicators suggest that the stock could see some consolidation before resuming its downward trend absent any bullish catalysts.

Traders should watch for consolidation between $2.66 and $3.84. If the stock breaks down from $2.70, traders could see a move toward fresh lows. If the stock rebounds, traders could see a move higher toward resistance levels at $3.84. A breakout from those levels could lead to a move toward the 50- and 200-day moving averages near $5.00, although that scenario appears less likely to occur given the bearish sentiment and news flow.

The Bottom Line

AMC shares moved sharply lower during Tuesday's session after third quarter guidance came in well below consensus estimates. While the stock remains in a bearish downtrend, traders could see some consolidation over the coming sessions ahead of the company's next earnings announcement on Nov. 5, 2020.

The author holds no position in the stock(s) mentioned except through passively managed index funds.