In January, it was GameStop (NYSE:GME) leading the charge at the center of the Reddit rally. Now, AMC Entertainment (NYSE:AMC) is the front man, this time leading the so-called meme stock rally.

Investors are wondering how long this rally can last and whether it’s actually sustainable.

I hate to stick my neck out in these types of scenarios. But generally the answer is no, these types of rallies do not tend to hold up over time. That said, there is nothing general about this situation, and we’re seeing an orchestrated effort to squeeze a handful of stocks higher. After all, GameStop has held up pretty well from its initial squeeze.

Some find this price action entertaining. Others find it insulting. I just say, it is what it is. If you don’t want to participate in it, don’t. There are thousands of securities to trade on a daily basis and this affects about two dozen of them. If you are going to get involved, just keep your risk in focus, as the trading ranges are incredibly wide.

For now, AMC remains the alpha dog in this current rally.

Reddit Saves AMC

2021 feels like a better year than 2020. There’s light at the end of the tunnel and we’re emerging from the novel coronavirus pandemic. Airport traffic is hitting new heights since the pandemic, while the U.S. has seen new cases plunge amid a strong vaccination push.

But let’s not forget, we also still have hundreds of deaths a day occurring the U.S. due to Covid-19. Globally, we’ve now had more coronavirus deaths in 2021 vs. 2020.

While things are clearly improving, particularly in the U.S., we haven’t gotten the full all-clear. Further, Q1 and the beginning of Q2 were a painful reality for businesses like AMC.

But thanks to the Reddit short squeeze we saw earlier in the year, the company was able to raise a substantial amount of cash. In fact, it has now done so several times, allowing AMC to bolster its balance sheet.

On Jan. 25, the company announced it raised or had commitments for $917 million. More than half of this was via equity, with the rest in various forms of debt. This would help AMC “make it through this dark coronavirus-impacted winter.”

Then in May, AMC brought in $428 million after selling 43 million shares at just below $10. A few weeks later in June, Mudrick Capital agreed to buy 8.5 million shares for roughly $27 apiece, raising over $230 million. That capital will be used for “acquisition opportunities and investments in existing AMC theatres.”

In all, the company raised about $1.2 billion this quarter. As President and CEO Adam Aron put it, “with our increased liquidity, an increasingly vaccinated population and the imminent release of blockbuster new movie titles, it is time for AMC to go on the offense again.”

Can the Rally in AMC Last?

Clearly AMC stock will survive. Or at least, it should survive. It’s got more than enough capital on hand to weather whatever remains of the Covid-19 storm and truthfully, management could decide to flood the market with even more supply of stock. A 10 million share secondary offering at $50 would raise half a billion dollars.

With all the raising it did in Q2 with no ill impact on the stock price, I wouldn’t be surprised to see Aron & Co. pull the trigger on another raise. In fact, I would applaud it after shares hit all-time highs at the beginning of the month.

Does the company go after something like Imax Corp (NYSE:IMAX), with a market capitalization below $1.5 billion? Is that what Aron means by going on the offense?

We’ll find out in the coming weeks and months, but I really think this company will be okay. That said, that doesn’t mean its stock is a good value. Trading in AMC stock is one thing. Investing in it is another.

Analysts expect AMC to remain unprofitable in 2022. Further, estimates call for “just” $2.5 billion in sales this year as it still feels the impact of Covid-19. In 2022, estimates call for $4.8 billion in sales. Round it up to $5 billion and we have a stock trading at six times 2022 revenue for a firm that never had sustained operating margins above 10%, a figure that was below 5% before Covid-19.

Bottom Line on AMC Stock

I would really like to see the $35 level hold as support on a pullback. Below puts the 21-day moving average in play, then ~$20 — the prior 2021 high.

Above $50 and $60 is in play, followed by the 52-week high at $72.62. Above that and this baby could continue to fly.

On the date of publication, Bret Kenwell did not have (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.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.