Shares of Cinemark (NYSE:CNK) are surging higher by over 9% following an upgrade by Morgan Stanley. The company operates in the same industry as AMC (NYSE:AMC), although AMC holds the title for the most theater screens across the U.S. and Canada. AMC operates 7,850 screens, while Cinemark comes in third with 4,426 screens. Thus, any positive for CNK stock should signal similar positives for AMC stock. However, investors should remember that while the two companies operate in the same industry, the respective management teams ultimately dictate each company’s potential.
Morgan Stanley analyst Benjamin Swinburne maintained his CNK price target of $22 and upgraded it to “overweight” from “equal weight.” The price target implies upside of over 20% from current prices. Swinburne believes that Cinemark is following a “counter-cyclical” trend as a form of inexpensive entertainment. As a result, it has been insulated from a slowing economy. This belief can apply to AMC as well.
On top of that, Swinburne expects the North American box office can grow by 85% in 2023 when compared to 2019 as customers return to theaters. He expects earnings before interest, taxes, deductions and amortizations (EBITDA) to grow by 50% year over year. In the analyst’s bull case of a “full box office recovery” by 2023, he believes CNK could surge to as high as $36. This reflects an enterprise value (EV)-to-EBITDA ratio of 7.5x.
With that in mind, let’s take a look at how analysts view AMC.
Analysts Chime In on AMC Stock
- Macquarie has a price target of $6. Despite the success of Top Gun: Maverick, analyst Chad Beynon’s forecasts for 2022 and 2023 remained unchanged. He cites several risk factors, such as elevated cash burn, inflation and labor shortages. Still, the analyst admitted that he would consider boosting his forecasts if more blockbuster and mid-tier movies attract larger audiences.
- Wedbush has a price target of $4. Analyst Alicia Reese is optimistic about the exhibition industry after a “content lull” during Q1. Throughout the year, she expects movie theater attendance to improve as more films are released. However, Reese expects continued volatility due to AMC’s “uncertain long-term multiple given its ownership.” She is also hesitant about the company’s possible plans to launch its own cryptocurrency.
- AMC carries an average price target of $9.09 among seven firms with coverage of the stock.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
