As AMC Leans Into Retail Investors, Goldman Says Sell Peer Cinemark

Despite expecting a sharp domestic box office recovery in 2021 and 2022, Goldman Sachs analyst Michael Ng downgraded both Imax (IMAX) and Cinemark (CNK) to Sell as he believes this is already reflected in current valuations. Further, the analyst believes that the closure of theatres during the pandemic may have accelerated the secular decline in movie-going and attendance, hamstringing the box office recovery back to pre-pandemic levels.

SELL IMAX, CINEMARK: Goldman Sachs analyst Michael Ng downgraded both Imax and Cinemark to Sell from Neutral with price targets of $18.60 and $19, down from $19.60 and $21, respectively. The analyst expects a "sharp" domestic box office recovery in 2021 and 2022 but believes this is reflected in the stocks' current valuation. Further, Ng expects the domestic box office recovery to be more limited than what is currently being priced into the shares. The box office recovery is at greater risk as consumer behaviors shifted during the pandemic, and film studios are increasingly leaning on home video and home video windows are declining, Ng contended, adding that he is more cautious on the box office outlook.

The analyst noted that although there's been a secular decline in movie-going, attendance declines have happened at a very slow pace. That said, he believes that the closure of theatres during the pandemic may have accelerated the secular decline in attendance, hamstringing the box office recovery back to pre-pandemic levels. Nonetheless, Ng acknowledged that he is "encouraged" by the pace of box office recovery in 2021 to-date, and is forecasting the 2021 domestic box office to recover sharply to $5.4B in 2021. More importantly, the analyst expects 2022 to represent a return to a more "normal" year from which to grow off and forecasts domestic box office of $8.2B. Although this is consistent with AMC's (AMC) box office expectations of $5B-plus in 2021 and $8B-plus in 2022, the analyst believes this is lower than what's currently being priced into consensus valuations for Cinemark and Imax.

1 2
View single page >> |

Disclaimer: TheFly's news is intended for informational purposes only and does not claim to be actionable for investment decisions. Read more at  more

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.