After coughing back most of its “meme stock” gains during 2022, AMC Entertainment (NYSE:AMC) has performed well thus far in 2023. Year-to-date, AMC stock is up 27.5%, even after a big move lower during late February/early March.

Over the past week, takeover rumors (more below) have pushed shares in the movie theater operator back out of “penny stock territory” ($5 per share or less). Given this news, plus improving overall sentiment among investors thanks to macro-related developments, is AMC poised to add to last month’s gains?

Taking a look at the facts, it’s highly questionable. Despite a low stock price, the company isn’t exactly an appealing acquisition target. In addition, while stocks could be on the verge of re-entering a bull market, that doesn’t necessarily mean that AMC will come along for the ride to higher prices. Instead, shares could soon be back onto a downward trajectory.

Why Speculators Have Jumped Back into AMC Stock

Admittedly, the most recent cycling-back into AMC Entertainment by retail investors has been as strong as the last such wave. On Feb. 27, shares spiked by 22.7%, just before the company’s quarterly earnings release. However, while the latest rally hasn’t been as strong as the last one, the reason behind it has been enough to put the former “meme king” back into the spotlight.

As InvestorPlace’s Samuel O’Brient wrote on March 28, AMC stock rallied by around 13%, on the heels of an article published by The Intersect, reporting that Amazon (NASDAQ:AMZN) was mulling an acquisition of the company, according to sources “familiar with the discussions.”

While the speculative frenzy about these rumors simmered down in subsequent trading days, AMC managed to hold steady through the end of the month. Again, alongside the takeover talk, improving stock market sentiment, a result of rising optimism that the Federal Reserve is done with rate hikes, also provided some support.

On March 31, AMC’s closing price was $5.01 per share. In other words, a penny above the “penny stock ceiling.” However, while holding steady now, that may not be the case for long, and not in a good way.

What May Lie Ahead for Shares

Although the takeover rumors have provided just a modest boost to AMC stock, shares are at high risk of giving back said boost. It’s not far-fetched to believe that Amazon is interested in buying this company. Per the aforementioned “familiar sources,” Amazon could wring out numerous growth synergies via ownership of AMC and its worldwide chain of theaters.

However, as one of the “sources” noted, Amazon may want to take its time before making an offer. The fact that neither party has discussed these rumors backs this up further. If it becomes more obvious that a takeover offer isn’t imminent, a move back to between $4 and $4.50 per share is likely. From there, shares could continue to slide.

Why? Even as market sentiment may be shifting back towards bullishness, interest rates remain high, as does macro uncertainty. Investors are still much more valuation-conscious than they were at the height of the runaway bull market.

At the same time, the influence of the meme stock community continues to weaken. In turn, the de-rating of AMC, down to levels in line with its underlying value, is likely to resume.

How Low Could it Go?

Based on the latest results and guidance, AMC appears to be on track to continue its recovery back to pre-Covid levels of revenue and profitability. However, shares are currently at price levels that technically are above what the stock traded for at the onset of the pandemic.

Furthermore, as a result of numerous capital raises during the 2021/2022 “meme waves,” AMC’s share count has grown nearly  five-fold compared to where it was at the end of 2019. This heavy dilution comes with little to show for it, as most of this cash has been burned through already.

With this, forget a move merely back to pre-meme prices (around $1.50 per share). An ultimate move down to the low end of analyst price targets (50 cents per share) may not be out of the question.

Bottom line: still grossly overvalued. Keep avoiding AMC stock, despite the recent news.

On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.