Cinemark and Imax Steal the Spotlight in Movie Theater Comeback

Key Points

• Cinemark leads year-to-date performance among movie theaters with a 113.05% gain.
• Imax has also posted a solid 2023 performance, with a 27.56% gain.
• AMC's shares plummeted by 70.98% in 2023 as the company continues to face financial challenges.

Movie theater chains, at least some, are reeling in the profits as audiences flock back. Cinemark Holdings Inc. NYSE: CNK pivoted back to profitability in the most recent quarter after suffering losses in most quarters since 2020.

Imax Corp. NYSE: IMAX reported a profit in 2022, and the company is expected to show blockbuster growth of 662% this year, to 46 cents a share. Next year, that's expected to grow by another 44% to 66 cents a share.

It probably isn't much of a surprise to anyone, but a laggard in the industry is perennial meme stock AMC Entertainment Holdings Inc. NYSE: AMC hasn't turned a profit since 2018, and analysts don't expect any change in the next two years. 

Cinemark is the Industry's Stock Price Leader

When it comes to stock performance, Cinemark is the clear winner, advancing 113.05% year-to-date, although Imax has also posted a strong 2023 gain of 27.56%.

AMC is down 70.98% this year. At this juncture, it's less of a movie theater company and more of a struggling financial instrument. 

However, for exposure to the movie-theater industry rebound, Cinemark and Imax are both worthy candidates to evaluate. 

In an August presentation for investors, Cinemark showed a steady recovery since the drop off a cliff in 2020. However, revenue isn't even close to being back to 2019 levels.

The company credits the improvement for high levels of recliner seats, the addition of D-Box motion seats, expanded food and beverage offerings, its customer loyalty program and multi-channel marketing campaigns. 

Crushing Analysts' Views

In the most recent quarter, Cinemark earned 80 cents a share on revenue of $942.30 million. That trounced views on the top and bottom lines, as you can see using MarketBeat's Cinemark earnings data. 

Highlights from the second-quarter earnings report included: 

• Worldwide attendance increased 24% year-over-year, driven by a steady recovery of film volume and a diverse slate of high-quality films.
• Average ticket price increased 6% in the U.S. and 23% internationally, with currency values adjusted to account for exchange rates.  
• Concession per capita increased by 11% in the U.S. and 27% internationally, with currency adjusted for exchange rates. 

Analysts expect Cinemark to post a profit this year and next. 

Debt is an important part of a real-estate heavy business like movie theaters, which, not incidentally, was suddenly clobbered.

The company has also been refinancing its credit facility, securing a $650 million term loan maturing in 2030 and upsizing its revolving loan to $125 million, maturing in 2028.

In many cases, a company's debt is not a prime consideration when considering a stock. However, if a company takes on a lot of debt and revenue drops sharply, that could be a problem. However, investors don't seem to believe that's a problem for Cinemark.

Analysts See Upside to Cinemark

A glimpse at MarketBeat's Cinemark analyst ratings shows a consensus view of "hold," with a price target of $19.06, an upside of 6.10%.

The stock cleared a consolidation with a buy point above $18.85, rallied to a high of $19.85, then pulled back as other mid-caps also fell, underperforming the S&P 500. It's now trading almost 5% below its buy point, meaning it fell out of the buy range. However, support at its 50-day average indicates investors are holding shares rather than completely bailing out, as they have done with AMC. 

Imax, meanwhile, is forming a cup-with-handle base with a buy point north of $20.70. Shares closed at $18.03 on October 12, down 3.58%. 

Swifties for the Win

One big development that could boost both Imax and Cinemark stock is the release of "Taylor Swift: The Eras Tour." The concert movie is expected to draw legions of Swift fans, known as Swifties, and theater chains say the timing couldn't be better, as the glow from summer hits "Barbie" and "Oppenheimer" has worn off. 

Imax CEO Richard Gelfond told Yahoo Finance that his company has seen huge demand before, but for big blockbusters, never for a concert film. 

The movie will show on at least 625 Imax screens in 45 markets internationally, including 377 in the U.S. 

Cinemark and AMC theaters will also show the film, so all three companies should get a solid revenue bounce.