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A Wall Street analyst cuts his 2022 and 2023 domestic box office revenue projections but maintains “buy” ratings on three major circuits.
By Georg Szalai
International Business Editor
After nearly two years of halting gains, major theater chains are finally starting to see a box office recovery as the summer blockbuster season gets into full swing. But an accelerated recovery in grosses is happening amid concerns of a broader economic downturn, leading to questions on Wall Street about how quickly exhibitors can bounce back.
Ahead of second-quarter earnings season, B. Riley Securities analyst Eric Wold has cut his 2022 and 2023 domestic box office revenue projections “to provide a more realistic recovery ramp and some additional conservatism built into our models.” Wold cited “a domestic box office performance during the first half of the year that was lower than we originally projected, with our estimates for the second quarter being reduced accordingly.”

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Wold reiterated his “buy” ratings on the stocks of exhibition companies Cinemark Holdings, Imax Corp. and The Marcus Corp. though, while he maintained “neutral” ratings on AMC Theatres and theater advertising network National CineMedia. (AMC Theatres, the largest chain, reports its second quarter earnings on Aug. 4.)
“Even though the upcoming film slate during the third quarter has become increasingly tough, we believe the underlying demand patterns for high-profile films and the widening demographic reach bodes well for the sector heading into the fourth quarter and 2023,” the B. Riley analyst argued. “We continue to believe the group is positioned for a return of valuation multiples to pre-pandemic ranges as box office trends rebound to the $10 billion-plus level in 2023.”
Wold now forecasts a 28 percent box office revenue decline for 2022 compared with 2019 levels, compared with a previous projection for a 20 percent drop. For 2023, he now predicts a 7 percent decrease instead of 3 percent previously. “However, we continue to expect the major exhibitors to outperform the industry to similar degrees as in recent quarters,” the analyst wrote.
The Wall Street analyst remains bullish on exhibition stocks even despite economic worries. “With the heightened risk of a domestic recession in recent months, we continue to believe the exhibition group can be viewed as somewhat of a safe haven within the consumer and entertainment spending segments (and should not be experiencing the same stock pressures as other discretionary consumer sectors),” Wold said.

Powered by Top Gun: Maverick and Jurassic World Dominion, May and June have propelled gains at the box office, with last month totaling $1.114 billion domestically, up from $409.2 million in the same month in 2021 but still down from pre-pandemic 2019.
MKM Partners analyst Eric Handler, meanwhile, touted the outlook for Imax in a Friday report. In it, he lowered his second-quarter financial estimates for the company “as a result of Imax having a majority of its China circuit shut down for much of the second quarter” due to a resurgence of COVID-19. Handler now projects quarterly revenue and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of “$73 million (+44 percent over the second quarter of 2021, -30 percent versus the second quarter of 2019) and $25 million (+185 percent, -40 percent versus second quarter of 2019), respectively, down from $85 million and $33 million.”
In his view, though, “sentiment toward Imax remains overly bearish and not reflective of an attractive, dual-revenue stream, global, asset-light business model with a focus on blockbuster content.”  Explained Handler: “Although we are lowering our second-quarter estimates as a result of a longer-than-expected lockdown in China, this issue was temporary (we have pushed out installation revenue into the third and fourth quarter), nearly all Imax screens across the country have reopened, and the volume and quality of content should improve going forward as key title releases were postponed.”

His conclusion: “We believe movie-going will snap back relatively fast in China (as it did when the country first reopened in late 2020, early 2021) and provide a nice tailwind in the back half of this year.”
Speaking of blockbusters, especially the final quarter of 2022 has “some mega-hit potential,” the analyst suggested. “We see the third quarter benefiting from a strong July lineup, which includes Thor: Love and Thunder (7/8) and Nope (7/22), as well as a several high-profile local-language titles in China, including Mozart in Space (7/15), which was partially filmed with Imax cameras.”
Handler added: “Box office revenue should move higher in the fourth quarter where we look for Imax grosses to exceed $300 million for the first time since the second quarter of 2019. Fueling this forecast is Black Adam (10/21), Black Panther: Wakanda Forever (11/11) and Avatar: The Way of Water (12/16).”
He continues to rate Imax shares at “buy” with a $23 price target.
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