Shares of Cinemark shot up Friday after an analyst treated the company to a rare double upgrade, stating that “movies are back!”
Cinemark stock gained $1.14, or 6%, to $19.89 in morning trading. The shares closed Thursday up 34% since the start of the year. Friday’s gains came after Wells Fargo boosted its rating on the stock by two notches to “Overweight” or “Buy,” from “Underweight” or “Sell.”
While not unheard of, it is atypical for an analyst to skip from sell to buy without stopping at a “Hold” or “Neutral” rating in between. Of the 14 analysts who cover Cinemark, two have “Strong Buy” ratings, seven have “Buy,” four have it at “Hold” and one has it at “Sell.”
Wells Fargo analyst Omar Mejias also increased his price target on the shares by $10 to $23, implying that he expects the shares to continue rising by nearly 23% over the next 12 months.
Behind the upgrade was Mejias’ conviction that strong box office in the first three months of the year is a sign that consumer demand is robust with “legs to next year,” the analyst wrote in a research note for investors, the market tracking service TheFly.com reported. Mejias believes Cinemark has strong operating leverage, and said the stock is still inexpensive despite the rally year-to-date.
Among the catalysts for the stock, Mejias pointed to a solid slate of movies scheduled for release for the rest of this year and next, suggesting that titles like Universal Studio’s “The Fall Guy, Pixar’s “Inside Out 2,” Universal’s “Despicable Me 4” and Disney’s “Deadpool and Wolverine” will draw audiences, according to Seeking Alpha.
Mejias said the screen offerings the last three months of 2024 look to be the best slate since before the pandemic, Seeking Alpha said. Among the titles he pointed to were Warner Bros. Discovery’s “Joker: Folie á Deux,” Sony’s “Venom: The Last Dance,” Paramount’s “Gladiator 2 and Disney’s “Mufasa: The Lion King.”
Next week’s CinemaCon in Las Vegas, could provide another boost for Cinemark, Mejias wrote.
He also noted that Plano, Texas-based Cinemark has made progress cutting costs and improving operating efficiencies and lauded its dynamic pricing scheme, which has driven higher concession sales.