Movie-theater stocks surged on Monday to extend their recent rallies after the debut of The Super Mario Bros. Movie attracted crowds reminiscent of the years before the Covid-19 pandemic.
Cinemark Holdings Inc. hit the highest intraday level since August after saying April 8 marked the strongest day of attendance for the chain since Christmas Day 2019 with the openings of Super Mario and Air, a film about Nike Inc.s courtship of Michael Jordan. Imax Corp. jumped to the highest in more than a year after announcing that Super Mario spurred its best opening weekend ever for an animated film with $21.6 million.
Meanwhile, AMC Entertainment Holdings Inc. advanced as much as 9.6% on news that the weekend was the companys third best since December 2019. Movie-theater operator Marcus Corp. followed the group higher, rising as much as 8.9% in the biggest gain since September 2021.
The four stocks have each notched double-digit gains so far in 2023 after several volatile years as the cinema industry slowly recovers from pandemic restrictions. The late 2022 release of Avatar: The Way of Water helped power the theater chains strong start to the year.
Domestic box office revenue for the first quarter of $1.7 billion was about 2% above B. Riley Securities analyst Eric Wolds projection, he wrote in a research note Monday. While its still just about 72% of first quarter 2019 levels, it ties for the highest quarterly box office recovery level since the pandemic, matching fourth quarter 2021, when Spider-Man: No Way Home was released, he wrote.
Wold views the recent strength in theater stocks as a sign that there is increased optimism around the box-office outlook. He boosted his 12-month price targets for Cinemark, Imax and Marcus, while reiterating his buy ratings. Wold has a neutral rating on AMC.
As theater chains continue to show progress toward returning to pre-pandemic revenue and profitability levels, investors will feel more comfortable not only assigning pre-pandemic average valuation multiples to the stocks, but also looking forward to 2024/2025 estimates as the recovery is anticipated to more fully take hold on results, he wrote.
With assistance from Katrina Lewis and Janet Freund.
