Should you invest in AMC stock as shares edge lower despite posting solid Q3 results?

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On Tuesday, AMC Entertainment Holdings Inc. (NYSE:AMC) shares declined by more than 10% after reporting its fiscal third-quarter results. The company announced its most recent quarterly revenue and earnings Monday after markets closed, beating the consensus analyst estimates.

However, although AMC reported a significant growth in pandemic revenue and a massive decline in net loss, it remains far from reaching pre-pandemic levels.

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The company posted FQ3 GAAP earnings per share of -$0.44, beating the average for analyst estimates of -$0.54. On the other hand, revenue for the period skyrocketed by 538.7% from the same quarter in 2020 to $763.2 million, surpassing the consensus Street forecast by $29.85 million.

AMC shares have spiked more than 1,900% this year, despite the challenges created by the pandemic. 

Is it safe to buy AMC shares?

From an investment perspective, AMC shares trade at a steep P/S ratio of 25.39, making the stock less attractive to value investors. 

However, its growth prospects look exciting, with analysts expecting its earnings per share to recover by more than 92% this year before improving further by 74% next year.

Therefore, although the company’s return to pre-pandemic levels is still far away, the stock could gain the attention of growth investors.

Source – TradingView

Technically, AMC shares seem to be trading within a consolidative triangle formation in the intraday chart. The stock has recently spiked before finding trendline resistance, which triggered Tuesday’s pullback. 

However, with shares still far from reaching overbought conditions, investors could target potential breakout profits at about $50.32, or higher at $58.24, while $32.29 and $24.40 are crucial support zones.

A breakout could be imminent

In summary, although AMC shares trade at a steep P/S ratio, the stock has pulled back significantly from its all-time highs of $72.62, reached in June.

Therefore, given the company’s exciting earnings growth prospects, it could be time to buy the stock ahead of a potential breakout.

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