Why Cinemark Stock Dropped Almost 20% This Week


What happened

People love going to the cinema, but lately they don’t love it enough to boost the movie industry. Following a disturbing analyst report on recent cinema attendance, a prominent cinema chain operator Cinemark Holdings (CNK -5.74%) really taken on the chin this week. According to data compiled by S&P Global Market Intelligence, the company’s stock price fell more than 18% during the period.

So what

This analysis was released early Tuesday by the investment bank Goldman Sachs. Its analyst Michael Ng wrote that total box office sales for the third quarter of this year were well down 32% from pre-pandemic levels. In fact, excluding the cornavirus-ravaged quarter of 2020, this past third quarter was the worst for the industry since 1996.

Ng didn’t mince words on what this could mean for Cinemark and its peers: “While the timing of content and production delays likely had a negative impact on the box office in [the 2022 third quarter]the extent of the underperformance creates uncertainty as to whether the domestic box office is expected to experience an outsized recovery in the near future.”

The analyst’s outlook was not entirely bleak. He added that 2022 could still be a decent time for the movie industry given some high-potential releases, including a new superhero. black adamand a pair of suites, Avatar 2 and Black Panther: Wakanda Forever.

Now what

Still, Ng isn’t the only analyst predicting a pessimistic end to the industry, at least in the near future.

Over the week, several of his peers turned more bearish on movie theater stocks, especially Swiss creditby Douglas Mitchelson, who downgraded Cinemark from outperforming (buy) to underperforming (sell). In addition to recent weakness, Mitchelson thinks a flimsy 2023 release slate from major studios will exacerbate the industry’s pain.

Eric Volkman has no position in the stocks mentioned. The Motley Fool fills positions and recommends Goldman Sachs. The Motley Fool has a disclosure policy.


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