Movie Theater Analyst Sizes Up AMC, Cinemark And More, Predicts 'Box Office Rebound In 2025'
A leading movie theater analyst is upgrading shares of Cinemark Holdings (NYSE:CNK) and sharing commentary on the sector after recent animated hits "Inside Out 2" and "Despicable Me 4" could show strength for 2024.
The Movie Theater Analyst: B. Riley Securities analyst Eric Wold has the following ratings and price targets on the movie theater sector:
- AMC Entertainment Holdings (NYSE:AMC): Neutral rating, $8 price target
- Cinemark: Upgrade from Neutral to Buy, raises price target from $16 to $27
- Imax Corporation (NYSE:IMAX): Buy rating, $30 price target
- Marcus Corporation (NYSE:MCS): Buy rating, $20 price target
- National CineMedia (NASDAQ:NCMI): Buy rating, $7.50 price target
The Analyst Takeaways: Second-quarter domestic box office was $1.95 billion, which was below estimates of $2.35 billion and down 27% year-over-year, Wold said in the new investor note.
"While the quarter was a disappointment compared to the stronger-than-expected box office results experienced during 1Q24, we continue to chalk up the weak box office results to the relatively sparse film slate that was caused by production delays from the Hollywood strikes as opposed to any shifts in moviegoing behavior or moves by the studios to lock out theaters from key releases," Wold said.
Wold sees a more optimistic picture for the third and fourth quarters, while lowering the full year estimates for 2024 and 2025.
"We remain extremely positive about a box office rebound in 2025, due to the strong slate and delayed titles from 2024."
The analyst points to individual titles being a key to the strength in the second half of 2024. Wold raises domestic box office projections on the recently released "Despicable Me 4" from $260 million to $315 million and on "Inside Out 2" from $305 million to $625 million.
Another big box office prediction increase from the analyst is on "Deadpool & Wolverine" taking the domestic estimate from $365 million to $475 million.
B. Riley on AMC: The analyst maintains a Neutral rating on AMC and lowers second quarter and full year estimates after the lower-than-expected box office results in the second quarter.
"We believe the combination of continued overall post-pandemic market share gains and the concentration of IMAX and other premium screens relative to peers should help the company counter the overachieving box office headwinds," Wold said.
The analyst said AMC has 51% market share of IMAX screens in the U.S.
Stronger guest monetization and management focusing on cost reductions are highlighted by the analyst.
"We are optimistic that the improved balance sheet will enhance the company's position in its discussions with debt holders."
B. Riley on CNK: The movie theater stock gets lowered estimates for adjusted EBITDA and revenue from the analyst for the second quarter and full fiscal year.
Cinemark is upgraded by the analyst on improved operational structure and strong management controls.
"We believe that management likely staffed the theaters and reduced operational expenses in anticipation of those trends – and we do not expect the weaker-than-expected results caught management by surprise," Wold said.
The analyst said the strong showing of "Inside Out 2" could provide higher margins for the movie theater stock.
Wold said valuations on movie theater stocks shifts to 2025 with Cinemark shares underestimated by investors.
B. Riley on IMAX: After the COVID-19 pandemic, one major trend for the movie theater industry is increased market share for premium screens, the analyst notes.
The analyst said Imax screens represent around 4.5% of domestic box office over the trailing two-year period, compared to around 3.3% market share for the two-year period before the pandemic.
"We believe the desire of moviegoers to gravitate toward premium auditoriums demonstrates a desire to escape streaming platforms, see tent pole films during the first release window, and see them in the best manner possible," Wold said.
The analyst also said accelerated installation of new Imax screens in the second half of 2024 could help the stock.
B. Riley on MCS: The analyst lowers second quarter and full year estimates for Marcus Corporation, but sees several reasons for optimism.
A slate that may have favored the circuit's regional demographic, and a hotel segment that continues to outperform within this post-pandemic travel environment should help the company counter the overarching box office headwinds," Wold said.
The analyst said Marcus could be a player in acquiring underperforming movie theaters from peer companies.
"Believe hotels and resorts segment remains overlooked by investors."
B. Riley on NCMI: The movie theater advertising company also gets estimates lowered by the analyst based on second quarter results. The analyst highlights some bright spots for the company in the new note.
"We believe the continued advertising budget share gains and success in boosting monetization for attendees in recent quarters should help the company counter the overarching box office headwinds," Wold said.
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