Another retail trading frenzy and a second major content deal in as many weeks drove movement for media and technology stocks in the week ended May 28.
Shares in AMC Entertainment Holdings Inc. shot up by as much as 119% this week amid yet another Reddit-fueled retail trading rally that put pressure on short sellers, or those who bet on and profit from a drop in a security's price.
AMC's meteoric growth was a result of chatter on forums like Reddit's WallStreetBets and StockTwits. These "meme stock" pops in price caused frustration among major online brokers and regulators alike, with some policymakers calling for ways to limit retail traders' outsized influence on individual stocks.
The company's skyrocketing valuation also frazzled Wall Street analysts, forcing some of them this week to reassess their latest forecasts on the stock. For instance, in a May 26 note, B. Riley Securities analyst Eric Wold downgraded AMC stock to "neutral" from "buy," noting the stock's rapid rise eclipsed the price target he recently assigned to it much sooner than expected.
"Given that we only recently increased our [price target] from $13 to $16 on May 14, we are moving to the sidelines with an inability to justify taking the [price target] any higher at this point," Wold wrote.
However, Wold said he remains bullish on AMC's ability to continue recovering from a year of pandemic-driven headwinds as moviegoers start returning to theaters and seating capacity limits get lifted.
AMC stock closed May 27 trading at $26.52 per share.
In the M&A realm, Amazon.com Inc., in its second-largest acquisition to date, said May 25 that it would purchase MGM Holdings Inc. for $8.45 billion, a move that retail analysts say could be part of a bigger push by the e-commerce company to buy up other movie studios to further bolster its streaming library.
Morningstar analyst Dan Romanoff told S&P Global Market Intelligence that he would not be surprised if Amazon was also eyeing other studio acquisition targets.
However, the purchase could also lead to additional regulatory oversight of future content consolidation, experts added. The deal has already rallied antitrust advocacy groups worried about its potential impact on competition in the film and TV industry.
Despite the hefty price tag of the deal, Amazon shares ended the week roughly flat, closing May 27 at $3,230.11 apiece, up 0.84% from their May 21 close.
In social media, Twitter Inc. stock got a boost after CFO Ned Segal provided more clues this week about the company's planned subscription offering.
Speaking at an industry event, Segal said Twitter's subscription service would not replace the company's historically free service, but it will rather "provide premium features on top of a continuous improvement mindset around the free version of the service that everybody will continue to have access to." Segal noted the subscription service will likely include some type of "Super Follows" feature where influential Twitter accounts charge followers for access to premium content, as well as various types of premium content — from short-form videos to newsletters and publications.
The CFO said Twitter will reveal more about the offering in the "coming months as we test and learn more and ultimately roll it out to people around the world."
Twitter shares closed May 27 at $58.08, up 6.67% week-to-date.
In the cybersecurity space, Palo Alto Networks Inc. stock got a slight boost after a Wall Street analyst initiated coverage on the enterprise cybersecurity platform's stock, noting the company's promising expansion into additional growth areas.
In a note obtained by StreetInsider.com, Stifel analyst Adam Borg initiated coverage on Palo Alto Networks with a "buy" rating and $455 price target. The analyst said he expects "at least high-teens growth" for the company as it continues expanding its broader cybersecurity platform into other areas beyond its core firewall services.
The upgrade followed the company's better-than-expected earnings results for its fiscal third quarter 2021, in which top-line growth rose 24% year over year to $1.07 billion, beating analysts' estimates.
Palo Alto Networks stock ended May 27 trading up 1.33% for the week-to-date at $367.26 apiece.