Any time I write about meme stocks, I like to distinguish between trading and investing. I have no idea where AMC Entertainment (NYSE:AMC) will trade next week or next month. If you are YOLOing on AMC stock the same way you’s bet on a horse at the Kentucky Derby, this story is not for you. Good luck.

I’m much more interested in looking at AMC stock as a long-term investment. What has happened to AMC and other meme stocks in 2021 is unprecedented. It’s been driven by a number of unique circumstances.

I believe the fact that stock trading became trendy on social media during the pandemic resulted in a wave of relatively young, inexperienced traders participating in the market for the first time. There’s absolutely nothing wrong with that trend.

But it is almost certainly temporary, and long-term AMC stock investors should keep that in mind.

AMC Stock Is an Investment in Movie Theaters

I want to try to separate AMC’s business from the current unprecedented market circumstances. Economist John Maynard Keynes famously said, “The stock market can remain irrational longer than you can remain solvent.” However, stock markets don’t stay irrational forever. Fundamentals eventually always matter.

Memes and momentum are powerful forces in the near term. But a stock still represents an ownership stake in an actual business. That business succeeds or fails based on its ability to generate revenue and income.

AMC stock is a bet on movie theaters. Movie theater ticket sales have been steadily falling for about 20 years. There’s no question AMC outperformed many of its competitors in a difficult business. It has gained market share and leveraged pricing power to grow its revenue even in a shrinking industry.

Prior to the pandemic, AMC reported a $149 million net loss in 2019. Revenue was up just 0.2% that year. Those numbers suggest AMC may be reaching the limit of what it can do to offset the secular challenges to the theater model.

AMC vs. IMAX

AMC is certainly not the only movie theater stock. IMAX (NYSE:IMAX) is another company that is doing its very best to navigate a difficult environment. In fact, there’s a strong case that IMAX has done an even better job than AMC.

In 2019, IMAX reported 5.6% revenue growth, outpacing AMC. It reported a net profit of $46.8 million that year. IMAX was also profitable in 2016, 2017 and 2018 as well.

Like AMC, IMAX has been bucking the broader trend in the theater business and growing revenue steadily throughout the past decade.

Like AMC, IMAX has relied heavily on debt to navigate the pandemic. AMC now has $11.3 billion in debt. IMAX has $289 million in total debt.

The good news for IMAX investors is that the company hasn’t been forced to turn to extreme shareholder dilution to stay afloat. AMC’s outstanding share count is up 383% since the beginning of 2020. IMAX’s share count is actually down 2.9% in that time.

The Red Flag

All those numbers paint a clear picture of the businesses of AMC and IMAX. The movie theater business is struggling. But AMC and IMAX were doing a tremendous job of making the best of a difficult situation prior to the pandemic. IMAX was doing a better job of avoiding dilution and staying profitable, at least until the pandemic hit.

Understandably, these two stocks struggled in recent years. A look at the chart below highlights the extremely close correlation between the performances of AMC stock and IMAX stock throughout almost all of the last five years.

Of course, that correlation broke down completely in early 2021. AMC stock skyrocketed to new all-time highs while IMAX remains down 26.2% overall in the past five years.

How to Play AMC Stock

As a value investor, I rely heavily on fundamental business metrics. But I want to conclude this article with an appeal to common sense.

AMC and IMAX are in the same struggling business. Does it make any sense that one stock should be at all-time highs while the other one remains in a multi-year downtrend?

In my opinion, IMAX stock is an accurate representation of the long-term outlook for the movie theater business. AMC stock temporarily represents something completely different. It represents Wall Street counterculture and a populist statement against financial market corruption and power.

Maybe that political statement will ultimately be good for the world in the long term. Maybe not. But movie theaters are struggling, and long-term investors should avoid both IMAX and AMC stock.

On the date of publication, Wayne Duggan 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.

Wayne Duggan has been a U.S. News & World Report Investing contributor since 2016 and is a staff writer at Benzinga, where he has written more than 7,000 articles. Mr. Duggan is the author of the book “Beating Wall Street With Common Sense,” which focuses on investing psychology and practical strategies to outperform the stock market.