Cineplex is undervalued, National Bank says

Coming out of the Hollywood strike, things are looking up for Cineplex (Cineplex Stock Quote, Chart, News, Analysts, Financials TSX:CGX), says National Bank Financial analyst Adam Shine.

As reported by the Globe and Mail, Shine April 11 reiterated his “Outperform” rating and price target of $12.50 on CGX.

“Last year’s Hollywood strikes impacted the release schedules of many films in 2023 and 2024,” Shine wrote. “CinemaCon runs this week through [Thursday], with studios showcasing upcoming titles and exhibitors expressing optimism about momentum ahead, especially as more movies get added to this year’s slate – 32 films have been added over the past 3+ months bringing total anticipated wide releases to 110 like 2023 (119 in 2019). The Hollywood Reporter recently reported that “things are looking slightly better than expected” and the “2024 global box office forecast [is] up slightly [but] still below last year”. We moved our box office estimate for CGX to down 3.7 per cent year-over-year from down 5.2 per cent in 2024, while keeping an increase of 15 per cent for 2025. So far the AMPTP is averting any IATSE strikes.”

The analyst said ahead of the company’s first quarter results, which are due May 9, things are looking up for the company.

“CGX reported that January box office was down 18 per cent year-over-year and 72 per cent of 2019 level, while February was down 24 per cent year-over-year and 67 per cent of level in 2019,” he said “BoxOfficeMojo indicated that North American box office in March was over 17 per cent higher year-over-year, driven by several titles but anchored by the second Dune movie. In addition to likely outperforming on the latter, CGX had the benefit of several international films which we believe helped drive its March box office near $58-million (up 43 per cent year-over-year, 93 per cent of 2019). While we think in-cinema advertising was lower year-over-year, overall Media revs are forecast to have been relatively flat as Cineplex Digital Media began ramping up on its new Cominar mandate. We have LBE [Location-Based Entertainment] revs at down 0.5 per cent.”