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With New York cinemas outside of New York City allowed to reopen at limited capacity on Friday, Oct. 23, movie theater stocks rose on Monday as Wall Street debated the business implications of Gov. Andrew Cuomo’s weekend announcement.
Movie theaters will have to limit audiences to 25 percent capacity up to 50 people per showing, but exhibitors saw the news as an important victory.
Sector stocks rose in early Monday trading, with AMC Theatres shares jumping 11.8 percent to $3.40 as of 9:35 a.m. ET, and Cinemark rising 6.6 percent to $8.38. In London trading, meanwhile, Regal owner Cineworld’s stock was up 4.8 percent at that time.
AMC Theatres said Monday that “several AMC locations throughout New York state will resume operations beginning Friday” as a result of the weekend announcement by Cuomo, with a full list of venues expected later in the week.
“The reopening of movie theatres around the country is essential to the theatrical industry and the entire entertainment ecosystem,” said AMC CEO Adam Aron. “It has become clear that movie studios are not willing to release blockbuster product until key major markets are open. Therefore, it is a monumental step in the right direction for our entire industry that theatres are starting to open across the state of New York. We thank Governor Cuomo and local leaders in our New York communities for allowing guests to return to AMC at several locations throughout the state.”
One analyst was among the early Monday Wall Street people to react to Cuomo’s reopening plans.
“With Governor Cuomo reportedly allowing concessions to be sold at the theaters, we believe this represents a more meaningful move toward reopening the industry in that state versus the more restrictive moves taken by Mayor London Breed a couple of weeks ago toward theaters in San Francisco, with exhibitors in San Francisco opting not to reopen even with that ‘green light’,” B. Riley analyst Eric Wold wrote in a report. “Although movie theaters within the key five New York City boroughs will still remain closed for the time being, we view this as a positive step toward reopening those theaters in the coming weeks.”
He highlighted that this New York City “designated market area alone typically representing as much as 7-10 percent of domestic box office revenues.”
Wold also argued that the New York news could bode well for Hollywood studios’ film release plans. “Given that the major studios have been continuously pushing out the 2020 film slate, or shifting titles to streaming platforms, because of the uncertainty around major market reopenings, we remain optimistic that visibility into near-term reopening timelines for New York City, Los Angeles and San Francisco could put a halt to those moves and drive stability in the 2021 – and possibly even November/December 2020 – film slates,” the analyst said.
After Disney decided to launch Soul on its Disney+ streaming service instead of in cinemas, the key films remaining on the calendar this year are Universal’s The Croods: A New Age, Fox’s Free Guy, and Wonder Woman 1984 from Warner Bros.
Any improvement in the stability of the film slate and “associated visibility into a stronger industry restart is not only likely to drive a meaningful increase in investor optimism and valuations for the exhibitor group, but [could] potentially enable the liquidity-constrained companies [to] raise any needed capital to make it into and through that industry restart,” Wold concluded.
But citing “the continued uncertainty lingering around the industry,” he said he remains “comfortable with our recent estimate reductions that call for an 80 percent decline in 2020 domestic box office revenues, which would be followed up by 2021 box office revenues that are 30 percent below those generated in 2019.” But should the film slate stabilize and theater capacity restrictions lessen “along a similar path as what has been experienced in China (moving from 30 percent to 75 percent within only two months), then we see no reason that those projections could prove more conservative,” he added.
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