AMC Entertainment (NYSE:AMC) stock has had a mind-boggling run, but that doesn’t mean this meme stock favorite can hold onto its gains.

AMC stock has rallied 176% in the past month and now sits at around $58 a share. Year-to-date, AMC stock has gained more than 2,590%.

On the first trading day of 2021, AMC’s shares were worth just $2.01.

Many analysts continue to take a bearish view of AMC (one analyst has a price target on the stock of $0.01).

There are, however, a growing number of investors are starting to feel hopeful that the stock can move beyond its meme status and maintain its current level as the summer movie season gets underway with a heavy slate of blockbuster films.

A Closer Look at AMC Stock

To say that the last year has been difficult for AMC Entertainment is an understatement. Movie ticket sales in the U.S. plunged 80% in 2020 as theaters were shuttered and studios delayed releasing new films.

AMC reported a $4.6 billion loss for all of last year, and Wall Street analysts lined up to short the stock and bet that the price would sink.

With streaming services such as Netflix (NASDAQ:NFLX) and Disney (NYSE:DIS) ascending during the pandemic as people were forced to watch movies and TV from home, many analysts who cover the entertainment industry saw a cataclysmic shift taking place.

The worry was that it was one that AMC, the biggest movie theater chain in the world, would be unlikely to overcome.

But it was that very pessimism that retail investors who frequent the r/WallStreetBets Reddit forum latched onto to push AMC stock sky high and hurt the professional traders who had shorted the stock.

In the last week of May, short sellers lost an estimated $1.23 billion as AMC shares were pushed up 116% in five trading sessions.

The Reddit rally was so aggressive, that AMC took the unusual step of issuing a news release warning individual investors against buying its stock: “Unless you are prepared to incur the risk of losing all or a substantial portion of your investment.”

AMC also took advantage of its stock rising and issued a massive number of new shares.

The company’s shares outstanding have nearly quadrupled to 400 million from 104 million as management issued new stock to raise cash and help get it through this spring and to the point where movie theaters reopen for the summer.

Recovery Underway

There are encouraging signs coming from the box office.

Over the U.S. Memorial Day weekend, which is the official kick-off of the summer movie season, two widely released films performed better than expected.

A Quiet Place Part II grossed $57 million, the biggest box office haul in the pandemic-era and more money than the first Quiet Place film, which grossed $50.2 million, earned during its opening weekend back in 2018.

Fellow Memorial Day movie Cruella also performed well, earning $26.5 million in North American ticket sales over the long weekend.

Cruella served as a litmus test of sorts for the movie industry as the film was simultaneously released in theaters and made available on the Disney+ streaming platform at a cost of $30.

Cruella, which took in $16.1 million from 29 foreign markets for a global take of $42.6 million, proved that people still have a desire to see movies in theaters even if they are available on streaming platforms and people can watch from their couch.

In the coming weeks, industry analysts will be watching the box office numbers closely to see just how much pent-up demand there is as several tentpole movies are released.

Anticipated films include the latest Fast and Furious installment, as well as a sequels to Suicide Squad, James Bond, Top Gun and the Spider-Man franchise.

Movie studios and theater chains such as AMC have said publicly in recent weeks that they are committed to working together to keep the theatrical experience going.

They reminded investors and moviegoers alike that in 2019 before the pandemic, the global box office take exceeded $42 billion, the most revenue ever generated from ticket receipts.

Be Careful With AMC Stock

For better or worse, AMC Entertainment is the best performing stock of the year.

Its increase of more than 2,500% dwarfs other stock gains, including those of fell meme darling GameStop (NYSE:GME), which has risen 1,115% year-to-date.

Yet despite the huge rally and return of people to movie theaters, there are still plenty of reasons for investors to be cautious with AMC stock.

Prior to Covid-19, AMC had $265 million in available cash and debts totaling $4.7 billion.

At the end of this year’s first quarter (March 31) AMC’s balance sheet became technically insolvent. Right now, if the company sold every last asset it owns, it wouldn’t raise enough money to cover its liabilities.

Management of the company has said that it needs attendance at its nearly 1,000 movie theaters to average 85% for the rest of this year or it will likely have to restructure its debt. This could mean a bankruptcy filing seeking protection from creditors.

The debt load and poor financials are the reasons why AMC stock has been so heavily shorted on Wall Street.

For AMC Entertainment to remain a going concern, the box office will have to roar back to life in the coming months and sustain a torrid rate of growth.

While AMC stock has managed to stay above $50 a share in recent weeks, it likely won’t take much for the price to fall sharply.

As such, investors might want to wait and see how the rest of this year plays out for the troubled movie theater chain before risking their money on a stock that could sink or swim at this point.

Disclosure: On the date of publication, Joel Baglole held a long position in DIS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.