A Wells Fargo analyst is impressed with the company's prospects
Things were looking bad for Cinemark a few years ago. When the COVID-19 pandemic hit, the company laid off half its corporate workforce and furloughed more than 17,000 of its theater employees because people felt far safer streaming stuff at home than they did at the movies — if they were even allowed to go.
But as Hollywood and the rest of the film industry return to their old rhythms, movie theater chains are feeling better about the future. The Wrap reports that Wells Fargo $WFC analyst Omar Mejias upgraded his outlook on Cinemark stock from “sell” straight to “buy,” a tremendous show of optimism.
“Movies are back!” the research note accompanying the upgrade says.
Cinemark stock rose as high as 9% on Friday, though it was up only 3% on Friday afternoon.
People may still be feeling the pinch of inflation and getting more cautious with their spending, with a retailers trying to figure out how to entice them to open their wallets wider. But Cinemark is charting a path towards more expensive options. Executives often tout that 70% of its seats are the fancy reclining kind.
“What tends to happen is people may cut back on other types of entertainment, but when they come to the movies, it’s their moment to splurge and make a moment out of it,” CEO Sean Gamble said at a recent investing conference. When it released its latest earnings numbers in February, which surpassed Wall Street expectations, the company said it was the only major theater chain to increase its market share in the U.S. since the pandemic began.
In 2020, Cinemark stock lost as much as 75% of its value, and it has muddled around in a lower trading range ever since. But Wells Fargo’s Mejias thinks shares could reach $23 by the end of 2024, which would be their highest price in three years.
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