Analyst: 'Eclipse' to boost movie chain stock
Recommends buying Carmike, Cinemark, Regal, selling ImaxThis year's roller coaster ride for exhibition stocks -- up big for the first quarter, down huge the next -- will resume with a nice push higher in the second half of the year.
So said Merriman Curhan Ford analyst Eric Wold on Thursday, who told his clients to buy shares of Carmike Cinemas, Cinemark and Regal Entertainment and sell their shares of Imax.
His mostly bullish scenario begins with "Eclipse," which set a record for a midnight showings by raking in $30 million on Wednesday. Although it opened during the second quarter, it will do most of its business in the third.
"We're stepping out of line to see 'Eclipse' and examining its significance to 2Q/3Q boxoffice," Wold wrote at the top of his research note.
Exhibitors took a big-time stock hit in the second quarter because of such underachievers as "Robin Hood" and "Sex and the City 2." Carmike dropped 56% in the quarter, Cinemark was down 27%, Regal was off 25%, and Imax was down 19%.
Those drops were a sharp contrast to the way exhibition stocks shot up during the first quarter, when Carmike outperformed all other stocks on The Hollywood Reporter's Showbiz 50 index.
All four of the primary exhibition stocks brought impressive gains to investors during the first three months of the year: Carmike was up 84%, Imax jumped 35%, Cinemark was up 29% and Regal rose 23%.
Wold wrote Thursday that the good times should resume for the exhibition stocks, with the exception of Imax, because second-half titles look promising and 3D screens are plentiful.
There are 17 3D movies planned for the second half of the year, about three times more than were released in the first half. And by year's end, there will be roughly 7,000 3D screens in the U.S., up from about 4,500 now.
Some of the titles Wold calls "key" in the second half are "The Last Airbender," "Harry Potter and the Deathly Hallows: Part 1," "The Chronicles of Narnia: The Voyage of the Dawn Treader" and "Tron: Legacy."
" 'Eclipse' is poised to start 3Q boxoffice on a strong note," Wold wrote, "which is greatly needed following the lower-than-expected boxoffice results during 2Q of roughly minus 5% (due to a poor movie slate and complacent marketing by the studios)."
Anders Bylund of the Motley Fool hit a similar note about movie marketing this week, writing that "Eclipse" offers evidence that "you don't need fancy technology to make an action-movie hit. Find the best marketers, and you'll find the big profits, too."
As for Imax, it did impressive business for the midnight showing of "Eclipse" -- even setting a record of $1 million-plus -- but Wold points out that on a per-screen average basis, it actually underperformed "Transformers: Revenge of the Fallen" a year ago. That film generated $5,675 per screen compared with $5,208 for "Eclipse."