The entertainment industry is experiencing growth by incorporating advanced technology and providing enhanced user experiences. Additionally, the long-term potential is bolstered by factors like widespread internet use, new offerings, and emerging technologies.
Amid this backdrop, while adding Cinemark Holdings, Inc. (CNK) to one’s watchlist could be wise, AMC Entertainment Holdings, Inc. (AMC) might be best avoided now.
Before diving deeper into their fundamentals, let’s discuss why the entertainment industry is well-positioned for growth.
Although digital engagement is expected to rise, the media and entertainment industry's growth is predicted to slow down to 2.8% by 2027 due to challenges like fewer podcasts being created and concerns about global uncertainties.
On the other hand, the end of Hollywood strikes brings stability. Despite changes in 2024, there's optimism for 2025 due to potential benefits from shifted release dates and expected higher box office revenues. The positive outlook is supported by a strong lineup of new movies and a post-strike recovery seen as a short-term setback, not a lasting trend.
According to a Markets N Research report, the global movie theater market is projected to grow at a 4.5% CAGR, reaching $92.40 billion by 2030. Moreover, the box office market revenue is projected to reach $41.41 billion in 2024, growing at a CAGR of 4.37% from 2024 to 2028. This is expected to result in a market volume of $49.13 billion by 2028.
Furthermore, the industry adapts to technological advances, transforming film production with digital tools for creativity, flexibility, and cost-effective offerings. The global media and entertainment market is projected to reach $2.44 trillion by 2028, growing at a CAGR of 6.4%.
Considering these conducive trends, let’s take a look at the fundamentals of the two Entertainment - Movies/Studios stocks, starting with the one positioned lower from an investment perspective.
Stock #2: AMC Entertainment Holdings, Inc. (AMC)
AMC and its subsidiaries engage in the theatrical exhibition business. The company owns, operates, or has interests in theaters worldwide.
In terms of the trailing-12-month gross profit margin, AMC’s 14.55% is 70.7% lower than the 49.58% industry average. Likewise, its 0.03% trailing-12-month levered FCF margin is 99.7% lower than the 7.81% industry average. Its 7.85% trailing-12-month EBITDA margin is 59.8% lower than the 19.52% industry average.
AMC’s revenues for the fiscal third quarter that ended September 30, 2023, stood at $1.41 billion. Its operating costs and expenses increased 20.6% year-over-year to $1.31 billion. The company’s adjusted net loss and loss per share stood at $13.90 million and $0.09, respectively.
Also, as of September 30, 2023, AMC’s total assets stood at $8.79 billion compared to $9.14 billion as of December 31, 2022.
For the quarter ended December 31, 2023, AMC’s EPS is expected to remain negative, while its revenue for the quarter ending March 31, 2024, is expected to decrease 5.9% year-over-year to $898.19 million. Over the past year, the stock has declined 89.5% to close the last trading session at $4.56.
AMC’s weak fundamentals are reflected in its POWR Ratings. It has an overall rating of D, which translates to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an F grade for Stability and a D for Sentiment and Quality. It is ranked last in the Entertainment - Movies/Studios industry. To see AMC’s Growth, Value, and Momentum ratings, click here.
Stock #1: Cinemark Holdings, Inc. (CNK)
CNK and its subsidiaries engage in the motion picture exhibition business. They operated 518 theaters with 5,847 screens in the United States, and South and Central America.
On November 7, 2023, CNK announced the expansion of its third-party concessions delivery services, partnering with DoorDash, Grubhub, and Uber Eats to bring movie snacks directly to homes across the U.S. They are the first major exhibitor to collaborate with all three delivery platforms.
In terms of the trailing-12-month Return on Common Equity, CNK’s 40.45% is 919.9% higher than the 3.97% industry average. Likewise, its 11.72% trailing-12-month EBIT margin is 40.8% higher than the 8.33% industry average. However, its 18.88% trailing-12-month EBITDA margin is 3.3% lower than the 19.52% industry average.
For the fiscal third quarter that ended September 30, 2023, CNK’s revenues increased 34.5% year-over-year to $874.80 million. Its operating income stood at $145.80 million, up 675.5% over the prior-year quarter.
For the same quarter, the company's net income attributable to CNK and net income per share attributable to CNK’s common stockholders were $90.2 million and $0.61, respectively, compared to a net loss and net loss per share of $24.5 million and $0.20, respectively. On the other hand, as of September 30, 2023, CNK’s total assets stood at $4.81 billion compared to $4.82 billion as of December 31, 2022.
Street expects CNK’s revenue for the quarter that ended December 31, 2023, to increase 1.7% year-over-year to $609.99 million. Its EPS for the same quarter is expected to remain negative. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 30.4% to close the last trading session at $15.26.
CNK’s uncertain outlook justifies its overall rating of C, which translates to Neutral in our proprietary POWR Ratings system.
It has a C grade for Momentum and Quality. It is ranked #3 in the same industry. Beyond what we stated above, we have also given CNK grades for Growth, Value, Stability, and Sentiment. Get all the CNK ratings here.
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CNK shares were trading at $15.32 per share on Tuesday morning, up $0.06 (+0.39%). Year-to-date, CNK has gained 8.73%, versus a 3.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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