Analyst Calls 'Tenet' Domestic Box Office "Positive Indicator of Demand"

Tenet- Publicity still 6-H 2020
Warner Bros. Pictures

B. Riley's Eric Wold also expresses optimism for the domestic outlook going into next year and raises his price target on AMC Theatres.

While the domestic box office launch for Warner Bros.' Tenet has widely been described as tepid, one analyst said he sees it as a good sign. "We actually view the results as encouraging and a positive indicator of demand given all of the COVID-19 headwinds," B. Riley analyst Eric Wold wrote in a Monday report.

The analyst echoed Warner Bros.' argument that it was a promising sign that Tenet this weekend dropped just 29 percent from the $9.4 million earned during the Sept. 4-6 weekend, even though that isn't an apples-to-apples comparison since the film rolled over over the long Labor Day weekend and is now playing in 100 more theaters.

"Acknowledging that it is not entirely apples-to-apples, we also feel the roughly 29 percent drop from last weekend's three-day total is a sign of potentially longer theatrical legs as moviegoers adjust," Wold argued.

About the $20.2 million long Labour Day weekend haul, the analyst said: "Prior to the COVID-19 pandemic, we were anticipating an opening weekend for Tenet in the $50 million-$55 million range. Accounting for the lack of New York City, L.A. and San Francisco (which drive about 25 percent of domestic box office) and the roughly 50 percent capacity restrictions, that would generate an adjusted opening of about $18.8 million-$20.6 million — with the $20.2 million opening at the high-end of that range."

Wold on Monday also expressed optimism for the box office outlook going into next year. "While there remains a number of headwinds (e.g., major markets remaining closed, capacity restrictions, film slate shifts, etc.), we actually see some encouraging signs from the early weeks that continue to give us optimism heading into 2021-plus," he wrote in reiterating his "buy" ratings on the stocks of Imax Corp., Marcus Corp. and cinema ad giant National CineMedia and  raising his price target on "neutral"-rated AMC Theatres from $4 to $5.50.

But highlighting that film slate shifts remain a "short-term sentiment wildcard," he added: "The latest shock to the calendar on Friday was the confirmation that Warner Bros. was moving Wonder Woman 1984 from 10/2 to 12/25 — which, given the improved balance sheets for each of the exhibitors, should only be viewed as a slight box office shift from the first quarter 2020 to the first quarter 2021."

Arguing that the focus was on New York City, L.A. and San Francisco, Wold said that he "would view any films released before [those markets open] as training runs before 2021-plus, which remains our focus versus any short-term results."