Proactive Investors - Cinema attendees continue to favor premium viewing experiences making IMAX Corp (NYSE:IMAX) the top pick out of cinema stocks for Wedbush analysts ahead of first quarter earnings.
The analysts believe ‘Outperform’-rated IMAX is the best way to play any upside to 2024 consensus estimates as consumers’ ongoing shift toward premium screens is driving significant market share gains as IMAX also expands its global footprint and leans into local language content.
“Moviegoers have become increasingly finicky with content, but they also spend more when they go to the theatres, opting for premium screens and a larger basket of high-margin concessions,” the analysts wrote.
“This trend continued in Q1, with moviegoers flocking to quality fare on IMAX screens while completely dismissing low-rated content.”
They also have an ‘Outperform’ rating on Cinemark Holdings (NYSE:CNK), noting the discipline of its management team and commitment to reducing its debt multiple.
“We expect shares to rebound through the year and into 2025 as it approaches the reinstatement of its dividend,” the analysts wrote.
For ‘Neutral’-rated AMC Entertainment Holdings (NYSE:AMC), the analysts expect to see continued volatility in its stock price, which is finally trading roughly in line with its pre-meme stock historical multiple range.
“We expect it to focus on conserving cash while repaying or restructuring debt in 2024,” they wrote.
Across the domestic box office, sales were down 7% compared to the analysts’ estimate of 4% in the first quarter.
“While the box office was at a virtual stand-still in January and February, it rose substantially in March due to the outperformance of Dune: Part Two,” they wrote.
“IMAX global box office finished down 5% year-over-year (domestic rose 19% year-over-year, while China fell 27% year-over-year on a difficult comparison, and the rest of the world fell 1% year-over-year).”
Looking ahead, the analysts believe there are plenty of quality titles coming to screens this summer to keep moviegoers happy and the summer box office afloat, with more family-friendly films than in 2023.
However, they noted that cinema companies will face difficult year-over-year comparisons in Q2 and Q3 when cinemas were bursting due to the Barbenheimer (Barbie and Oppenheimer) phenomenon last year.
A meaningful rebound is expected in the fourth quarter when comparisons ease leading into a stacked 2025.
The estimate the North American box office will be flat year-over-year at $8.9 billion for 2024 and see a 7% increase in 2025 to $9.5 billion.
“We took a modest view for 2025 and believe there is upside potential to our estimates, particularly for IMAX, which can benefit meaningfully from its global footprint and expansion of local-language fare,” they wrote.