MW Cinemark well-positioned for box-office rebound and market-share gains, says Benchmark
By James Rogers
Cinemark has opportunity to expand its market share as number of U.S. movie screens contracts, according to Benchmark analyst Mike Hickey
Movie-theater chain Cinemark Holdings Inc.'s growth prospects are strong, according to Benchmark analyst Mike Hickey.
"We expect the first quarter of fiscal 2024 to represent the lowest point in performance for the year, with anticipated sequential growth across the remaining quarters of fiscal 2024," he wrote in a note released Tuesday. "Looking ahead to 2025 and 2026, we think the box office is poised for significant growth, fueled by the return of a full slate of wide-release movies, providing a substantive growth catalyst."
Benchmark also pointed to Cinemark's $(CNK)$ "robust liquidity," underscored by $849 million in cash reserves and an untapped $125 million revolving credit facility. This, wrote Hickey "not only provides a solid foundation for navigating market dynamics and potential downturns in box-office performance and cash-flow generation, but also enables strategic debt reduction."
Related: Cinemark's stock sees choppy trading after wider-than-expected loss but revenue beat
The movie-theater chain is also well-positioned to benefit from the contraction of the U.S. screen network, according to Hickey. "Cinemark stands to gain from the substantial reduction in U.S. movie screens post-pandemic, with the count dropping to about 36,400, a 12% decrease from 2019," he wrote. "This contraction, combined with Cinemark's manageable debt and strong cash flows, positions it well against competitors who are struggling financially."
As smaller operators shut down and larger chains like AMC Entertainment Holdings Inc. $(AMC)$ may lose strategic flexibility from meaningful debt pressures, Cinemark has the opportunity to expand its market share, Hickey added.
As of Dec. 31, 2023, Cinemark's aggregate screen count was 5,719. The company had commitments to open five new theaters and 43 screens over the next two years, Cinemark said when it reported fourth-quarter results in February.
Related: The future looks 'cautiously optimistic' for AMC, Benchmark says
Benchmark has a buy rating and $22 price target for Cinemark. Shares of the movie-theater chain surged last week, lifted by a double upgrade from Wells Fargo to overweight. Wells Fargo also lifted its Cinemark price target to $23 from $13.
Cinemark shares fell 0.1% Tuesday. The stock is up 36% in 2024, outpacing the S&P 500 index's SPX gain of 8.7%.
In a separate note Tuesday, Benchmark's Hickey said that the future looks "cautiously optimistic" for AMC. The movie-theater chain and original meme stock is set to benefit from an upcoming slate of blockbuster movies and its large footprint of Imax Corp. (IMAX) screens, he wrote.
Related: AMC CEO calls first part of 2024 'a slog to wade through'
AMC shares were up 0.9% Tuesday, but have fallen 51.4% in 2024.
-James Rogers
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April 09, 2024 15:38 ET (19:38 GMT)
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