Two Analysts Project Slight 2012 Box-Office Growth Driven by Higher Prices
NEW YORK – Two analysts on Tuesday projected slight U.S. box-office gains in 2012 driven by higher prices rather than attendance.
With 2011 in the books, Barclays Capital analyst Anthony DiClemente predicted a 1.5 percent increase in the domestic box office this year to $10. 31 billion. While he sees attendance dropping 0.5 percent, he expects the average ticket price to rise 2 percent to $8.12.
MKM Partners analyst Eric Handler is more bullish. “We remain somewhat optimistic toward the 2012 box office and forecast 3 percent growth for the year, driven entirely by pricing,” he wrote in updating his estimates on Tuesday. He expects a 7 percent improvement in the first quarter thanks to “better carryover from holiday films.”
B. Riley analyst Eric Wold, meanwhile, foresees 4 percent growth this year driven by a 3 percent hike in ticket prices, but also a 1 percent improvement in attendance. "Although it’s always easiest to predict rebounds after weak trends the year before, we actually see multiple drivers away from the movie slate that could help exhibitor growth in 2012: an attractive M&A environment, continued 3D screen/slate expansion and a fully digital environment," Wold wrote.
But DiClemente wrote in a report that he doesn’t have a “strong conviction in [the] 2012 slate being able to “avenge” 2011 box office.” He added: “While there are plenty of movies that we are excited about in 2012, we admit that we felt similarly about the 2011 film slate this time last year.”
The movies with the biggest box-office potential this year in his opinion include The Hunger Games, The Avengers, Men in Black 3, Madagascar 3, Brave, The Amazing Spider Man, The Dark Knight Rises, the latest Twilight release and The Hobbit.
Handler mentioned some of the same releases as likely blockbusters and added James Bond 27 to his list.
What does the outlook mean for exhibition stocks? DiClemente expects them to remain under pressure early in 2012, but sees little additional downside for Regal Entertainment Group, which he rates at “overweight,” and Cinemark, on which he has an “equal weight” rating. “While the stocks could remain pressured in the face of negative revisions, we think the revisions are largely priced in and would not capitulate now,” he wrote.
Handler said that he sees “several reasons to remain positive” toward Regal, which continues to pay a dividend, Cinemark, which has further growth opportunities in Latin America, and Imax, which he argues is “in the midst of a rapid global expansion.” He has “buy” ratings on all three, but Imax is his “preferred name at the moment in the media and entertainment universe.”
Exhibition stocks have been under pressure amid weaker-than-hoped fourth-quarter box-office trends, but they both ended 2011 slightly higher. Regal's stock finished the year at $11.94, compared with $11.12 at the end of 2010. Cinemark rose from $16.62 to $18.49.
Discussing 2011 film business trends, DiClemente highlighted that the box office ended down 3.9 percent, with attendance down an estimated 4.7 percent, and ticket prices up an estimated 0.9 percent. “We had entered the year hoping that ticket pricing would provide a stronger offset to potential attendance challenges,” he said.