AMC Entertainment vs. Nokia: Which Meme Stock is a Better Buy?
As the meme stock craze roars back after a temporary lull, Reddit favorites AMC Entertainment (AMC) and Nokia (NOK) are making big ripples in the stoc...
AMC Entertainment Holdings, Inc. (AMC) and Nokia Corporation (NOK) have been riding the meme stock wave. Along with stocks such as BlackBerry Limited (BB), GameStop Corporation (GME) and others, these two meme stocks have witnessed double-digit price increases over the past few weeks. While the frenzy began earlier this year with GME's more than 1,600% gains, AMC has become the latest darling of retail traders, with its shares soaring more than 390% over the past month.
However, meme stocks, which have gone viral on social media irrespective of their financials, are extremely volatile. As such, the huge price gains could be short lived. In fact, according to Matt Maley, chief market strategist at Miller Taba, there could be an ugly ending to the AMC mania. NOK, in contrast, has been witnessing increasing positive cash flow and rising demand for its next-generation connectivity. Since the company is well on track to achieve profitable growth, the momentum in the stock might continue.
While AMC has gained 855.5% year-to-date, NOK has returned 32.1% over the same period. In terms of their past month's performance, AMC is the clear winner with 391.5% gains versus NOK's 10.1% returns. But which of these stocks is a better pick now? Let's find out.
This month, AMC announced that it had 501.78 million outstanding shares and approximately 4.1 million individual shareholders, as of June 2, who will be entitled to vote at its shareholder meeting scheduled for July 29. In connection with this, the company has received several inquiries about so-called fake shares and a potential stock split, which goes against AMC's capital raising goals.
On June 1, AMC entered an agreement with Mudrick Capital Management, L.P. to raise $230.5 million from the sale of 8.5 million shares of AMC's Class A Common stock. The company intends to use the proceeds from the sale to acquire additional theater leases and pursue deleveraging opportunities. However, selling shares could lead to its dilution of shareholder value.
This month, NOK and AT&T Inc. (T) completed the first call on C-Band spectrum to expand 5G coverage, utilizing NOK's new mMIMO antennas. The commercial network deployment is expected to begin later this year. As NOK diversifies its portfolio to include specific product categories, this innovative project should help the company offer a comprehensive range of solutions to its customers.
Also this month, the company teamed with SaskTel, an information and communications technology (ICT) provider in Saskatchewan, to support faster speed for remote learning and SaskTel's delivery of its maxTV and maxTV Stream video products and services in the province. This collaboration should enable NOK to cater to the needs of its customers in remote regions and deliver a seamless experience.
Recent Financial Results
In the first quarter, ended March 31, 2021, AMC's total non-GAAP revenue came in at $147.4 million, representing an 84.3% decline year-over-year. The company's adjusted EBITDA came in at a negative $294.7 million, while its free cash flow came in at a negative $324.8 million. It generated a $427.8 million loss from operation and a $567.2 million net loss during this quarter. Also, AMC's loss per share was $1.42 over this period.
During the first quarter, ended March 31, 2021, NOK's net sales increased 3.3% year-over-year to €5.08 billion ($6.19 billion). Its reported gross margin increased 260 basis points from the year-ago value to 37.9%. Its comparable operating profit came in at €551 million ($667.70 million), compared to €116 million ($140.57 million) in the first quarter of 2020. NOK generated a €263 million ($321.05 million) net profit compared to a €115 million ($140.38 million) loss in the prior-year period. Also, its EPS came in at €0.05, versus a €0.02 loss per share in the year-ago period.
Past and Expected Financial Performance
NOK's revenue has increased at a 7.9% CAGR over the past five years. In comparison, AMC's revenue declined at a 31.9% CAGR over this period.
NOK's revenue is expected to rise 4.3% in the current year, and 1.3% next year. Consensus EPS estimates indicate a 3.4% increase in 2022 and 16.5% per annum over the next five years. In comparison, analysts expect AMC's revenue to increase 94.1% in its fiscal year 2021 and 98.8% in 2022. The company's EPS is estimated to decline at a 217% rate per annum over the next five years.
NOK's trailing-12-month revenue is 57.5 times AMC's. Moreover, NOK is more profitable, with a 39.7% gross profit margin, compared to AMC's negative 260.9%.
Also, NOK's $3.43 billion in cash from operations compares favorably with AMC's negative $1.26 billion.
In terms of trailing-12-month Price/Sales, AMC is currently trading at 21.02x, which is significantly higher than NOK, which is currently trading at 1.19x. Also, its 14.32x forward EV/Sales is 1,276.9% higher than NOK's 1.04x.
So, NOK is the more affordable stock here.
NOK has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system, while AMC has an overall F rating, which represents Strong Sell. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
In terms of Growth Grade, NOK has an A, which is consistent with its earnings and revenue growth. But AMC has a Growth Grade of D, which is in sync with analysts' expectation of a decline in earnings. While NOK has a B grade for Sentiment, AMC has an F.
Also, in terms of Value Grade, NOK has a B, given its lower-than-industry P/E ratio. In comparison, AMC has an F grade for Value, given its higher-than-industry EV/Sales ratio.
In addition to what we've highlighted, our POWR Ratings system has also rated both NOK and AMC for Stability, Quality and Momentum. Get all NOK ratings here. Also, click here to see the additional POWR Ratings for AMC.
While shares of AMC and NOK have been skyrocketing as amateur retail investors glued to social media are hunting for meme stocks once again, AMC's dramatic price surge could have an ugly ending because the company continues to trade well beyond its fundamentals. However, NOK has an advantage here given its solid long-term growth potential, robust pipeline of products and strong cash balance. So, we believe NOK is a far better pick now than AMC.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to learn about the top-rated stocks in the Technology - Communication/Networking industry. Also, click here to see the top-rated stocks in the Entertainment - Movies/Studios industry.
NOK shares fell $5.43 (-100.00%) in premarket trading Monday. Year-to-date, NOK has gained 38.87%, versus a 13.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.AMC Entertainment vs. Nokia: Which Meme Stock is a Better Buy? appeared first on StockNews.com
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