Cinemark shares rose more than 5% in morning trading Thursday after a JPMorgan analyst upgraded the theater chain operator’s stock to “overweight,” the equivalent of “buy.”
The shares gained 53 cents, or 5.5%, to $10.06, trading around their highest point in over a month, with volume trending well above normal. The stock has changed hands between $8.28 and $19.76 in the past 52 weeks, and lost about 37% in 2022’s down year.
But JPMorgan analyst David Karnovsky thinks the stock is “oversold,” meaning the price was driven down too much considering the value of the company. He set a $15 price target, meaning he expects the stock to regain all of its 2022 losses within the 12 months.
Among the catalysts are the box office success of James Cameron’s “Avatar” sequel, “Avatar: The Way of Water.”
With $525.6 million in tickets already sold domestically and $1.75 billion worldwide, the epic sequel could become the pandemic era’s top grossing film this weekend – and is already one of the highest grossers of all time. The flick has pulled in audiences across the globe and is approaching the mark despite widespread COVID outbreaks in China depressing the market there.
It shows that audiences will return to the theater for an enhanced movie-going experience.
More new films becoming available to draw customers to theaters is another factor in Cinemark’s favor, Karnovsky wrote.
Amazon in November, for instance, said it plans to release as many as 15 films in theaters annually.
Cinemark is well positioned to gain market share given its “strong operating history, loyalty program, and healthier financial position,” Karnovsky told investors in a research note, according to TheFly.com. The analyst said recent comments from studios in support of the theatrical model also gives him greater confidence in the stability of the industry.
Among the notably upbeat views came from Bob Iger even before he resumed leadership of Disney.
“I’m a big believer in movies. I love big movies,” Iger told Kara Swisher at the Code Conference in September. “I like going to theaters and watching was basically a communal experience with a lot of other people going out of that house.”
“That won’t go away,” he added, though he acknowledged that much movie-watching has shifted to streaming. “It doesn’t come back to where it was.”
Also in September, Cinemark CEO Sean Gamble said the cinema is still a “vital tool” for studios, and he doesn’t believe the big houses will abandon theaters for releases because they allow films to stand out in an increasingly crowded pop culture market.
“It’s a big promotional and marketing vehicle. It creates a bigger impact when those films go onto those [streaming] platforms and subsequent distribution channels,” Gamble said.
Shares of rival theater operator AMC Entertainment also got a boost in Thursday trading, adding a penny to $4.93.