Why Credit Suisse Is Growing More Negative on Movie Theaters


Going to the movies has always been a great pastime in the United States. Based on what one key analyst is saying, movie theaters might be just that to investors, a thing of the past. Credit Suisse cut its ratings for a few of the largest movie theaters chains, after forecasting weaker domestic attendance growth despite a strong movie slate for 2017.

Credit Suisse cut its ratings on four out of the five movie exhibitors in the group. 24/7 Wall St. has included what the firm is saying about each of these stocks, as well as a recent trading history and the consensus analyst price target.

Imax Corp. (NYSE: IMAX) was downgraded by Credit Suisse to Neutral from Outperform with a $34 price target. The firm sees balanced risk/reward at current levels, given the strong movie slate in 2017 and 2018; slowing growth in China; the likely one- to two-year period before payback comes through on investments in new initiatives (original content, VR); and the full current multiple, which leaves little margin for safety.

Shares of Imax were recently down 2.5% at $31.80, with a 52-week trading range of $25.52 to $35.30 and a consensus analyst price target of $38.28.

AMC Entertainment Holdings Inc. (NYSE: AMC) was downgraded to Neutral from Outperform. Credit Suisse issued a $33 price target. The firm noted in its report:

Recent acquisitions add scale and geographic diversification, but after a strong run for the shares in the last 12 months, we believe they now look fairly valued relative to history and relative to peers. With a strong domestic box office in 2017/18 now widely anticipated, we see only modest upside from current levels.

Shares were last seen down 1.8% at $33.15, with a consensus price target of $38.04 and a 52-week range of $19.28 to $35.65.

Along with being downgraded to Underperform from Neutral, Regal Entertainment Group (NYSE: RGC) has a $22 price target. With the strength of the 2017 and 2018 movies slates now widely anticipated, Credit Suisse sees ticket price and concessions revenue growth continuing to trend lower. The firm also believes the current multiple looks high enough. There is a risk that some studios may explore a change to the exclusive exhibition window, and that Regal’s largest shareholder may continue to sell.

Regal Entertainment shares were down over 3% to $21.93. The consensus price target is $23.67, and the 52-week range is $16.52 to $24.79.

Credit Suisse also downgraded National CineMedia Inc. (NASDAQ: NCMI) to Underperform from Neutral, with a $13 price target. The firm detailed in the report:

We believe 2017 will be a tough year for cinema advertising, which suggests there could be limited scope for NCMI’s inventory utilisation and CPMs – and thus earnings – to grow. We also highlight the AMC overhang is likely to weigh on National CineMedia for the medium term, in our view. We significantly reduce our 2017/18 EPS estimates to $0.57/$0.58 (from $0.70 and $0.69 respectively), which leaves the current valuation looking full.

Shares of National CineMedia were down about 5.5% at $13.85, in 52-week range of $13.37 to $16.10 and with a consensus analyst target of $17.26.

And Cinemark Holdings Inc. (NYSE: CNK) was maintained at a Neutral rating by Credit Suisse. Its shares traded down 1.4% to $41.92. The 52-week range is $26.56 to $42.71, and the consensus price target is $43.52.

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