Exhibs an attractive buy, analyst says
December releases might fuel investment interest"Alvin and the Chipmunks: The Squeakquel," "Sherlock Holmes," "Nine," "Up in the Air" and "Avatar" make this a good time to invest in the movie exhibition industry, one Wall Street analyst was telling clients Monday.
Even though "Avatar's" $77 million domestic haul was at the low end of his $75 million-$85 million estimate, said Merriman Curhan Ford analyst Eric Wold, an eastern snowstorm is a valid excuse, and it could translate into a stronger second-week performance than he otherwise would have expected.
Wold told clients to buy shares of Regal Entertainment because he expects them to climb as high as $19 during the course of a year, while they closed at $13.63 on Monday. Ditto for Cinemark, with a price target of $17 compared with Monday's close of $13.68.
Both companies pay a 72 cents-per-share dividend which, at Monday's close, gave each of them a 5.3% dividend yield -- "a solid downside cushion," Wold said.
For Regal, Wold upped his fourth-quarter revenue growth estimate from 7.5% to 9%. For Cinemark, he increased his fourth-quarter per-screen revenue growth prediction from 5% to 9%.
Imax, though, is a more complicated story, "given the planned accelerated rollout for Cinemark XD," a large-format digital initiative that competes with Imax.
In fact, Wold expects Imax stock to drop to $10.50 or below from the $12.79 per-share price it was at Monday, even though he increased his fourth-quarter boxoffice revenue assumption from $57.4 million to $70 million.
Imax said Monday that it accounted for 13% of "Avatar's" domestic haul while representing 3% of the total number of screens.
Wold, who is "neutral" on Imax stock, said he's bullish on "The Twilight Saga: Eclipse" and "Toy Story 3" for Imax screens next year. And he expects that the next Harry Potter film will be added to the Imax slate as well as another two films, "Iron Man 2" being one candidate.