2023-06-14 11:47:13 ET
Cinemark's ( NYSE: CNK ) stock fell ~7% on Wednesday after B. Riley Securities downgraded the stock to Neutral from Buy and reduced its price target to $20 from $21.
B. Riley's analysts noted that they remain positive on the longer-term opportunity for Cinemark to benefit from the ultimate recovery of the domestic box office and continued growth opportunities in Latin America.
However, with Cinemark stock up ~112% YTD and only ~9% away from the firm's reduced price target, the analysts have moved to the sidelines given the increased 2024/2025 film slate uncertainty which has materialized in recent weeks with the Writers Guild of America (WGA) strike.
The analysts added that while they see no issues with Cinemark's liquidity position should there be any minor impact to 2024 forecast, they would not be surprised to see pressure on Cinemark's stock until the visibility into the 2024/2025 film slates improves and estimates for 2024/2025 stabilize, mainly given the strong YTD performance of the shares versus the peer group.
The firm recommend IMAX ( NYSE: IMAX ) ($27 price target) as an alternative Buy-rated stock within the firm's universe.
The analysts said that although Hollywood film release schedule shifts in 2024/2025 would also impact IMAX's box office outlook, they think company's management’s ability to increasingly lean on local language content in overseas markets and quickly pivot to other available Hollywood films remaining on the domestic slate should help to reduce that risk.
In addition, the firm expects IMAX to continue to benefit from the strengthening exhibitor interest in IMAX systems worldwide, which could help to replenish a backlog which the analysts expect to experience accelerated monetization in the years to come.
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Cinemark stock dips after B. Riley cuts rating, sees IMAX as alternative