The movie theater industry suffered greatly during the pandemic. The total 2019 domestic box office was approximately $11.4 billion and it plummeted about 80% in 2020, only bringing in $2.2 billion, and in 2021 it only rebounded somewhat, bringing in $4.4 billion.
As Covid-19 cases continue to fall, 2022 is looking promising for the movie theater industry. This past weekend “The Batman” was released and it had a huge opening weekend, bringing in $134 million at the box office. With a number of big movies scheduled to be released this year, such as "Jurassic World: Dominion," Doctor Strange in the Multiverse of Madness," and "Avatar 2," investors have high hopes for movie theater stocks.
The two largest American owned movie theater chains are AMC Entertainment (AMC) and Cinemark Holdings (CNK). Today I’ll analyze and compare both of them to determine which is currently the better buy.
AMC Entertainment (AMC)
Despite a difficult operating environment, AMC shares gained an astonishing 1,000% in 2021 due to its popularity as a meme stock. Valued at a market cap of $8.4 billion, AMC increased sales marginally from $5.46 billion in 2018 to $5.47 billion in 2019. However, revenue slumped to $1.24 billion in 2020 and improved to $2.52 billion in 2021.
The company ended 2021 with a cash balance of $1.6 billion. But its debt balance remains considerable at $5.4 billion. AMC’s outstanding share count is more than 510 million, compared to just 103.8 million, at the end of 2019. Its debt balance was also lower at $4.7 billion in 2019. As stated above, AMC is wrestling with both shareholder dilution and weak financials.
In Q4 of 2021, AMC reported sales of $1.17 billion compared to its year-ago sales of $162 million. However, it was still lower than sales of $1.4 billion in Q4 of 2019.
AMC ended 2021 with 593 domestic theaters and 337 international theaters while in the same period in 2019, it operated 636 domestic and 368 international theaters. The company attributed its solid Q4 results to the release of Spider-Man: No Way Home as well as pent-up demand and aggressive ad campaigns.
Cinemark Holdings (CNK)
In the December quarter, Cinemark increased sales by 579% to $666.7 million compared to just $98.2 million in the year-ago period. Its admission revenue stood at $344.9 million while concession revenue per patron was $5.16.
The net income attributed to shareholders rose to $5.7 million or $0.05 per share, compared to a loss of $239.3 million or $2.03 per share in this period. Its adjusted EBITDA of $140 million in Q4 allowed the company to end 2021 with an adjusted EBITDA of $80 million.
After accounting for one-time benefits, Cinemark, which is the third-largest theater chain operator in the U.S., generated positive cash flow in Q4 in the U.S. and Latin America markets, displaying a meaningful recovery after a pandemic-hit 2020.
Cinemark’s cash balance now stands at $707 million while its debt balance is much higher at $3.95 billion.
The verdict
AMC Entertainment is forecast to almost double sales to $4.6 billion in 2022, while analysts expect sales to rise by another 14.5% to $5.27 billion. Its adjusted loss per share is forecast to narrow from $2.66 in 2021 to $0.5 in 2023.
Comparatively, Cinemark Holdings revenue is forecast to rise by 80% to $2.72 billion in 2022 and by 14% to $3.1 billion in 2023. Its bottom-line is estimated to improve from a loss per share of $3.55 to earnings of $1.31 per share in 2023.
AMC stock is trading at a forward price to sales multiple of 1.82x while the ratio for Cinemark is much lower at 0.71x. While AMC remains unprofitable, Cinemark’s price to earnings multiple of 38x is quite reasonable, making it a better buy today.
AMC shares were trading at $16.22 per share on Monday afternoon, down $0.35 (-2.11%). Year-to-date, AMC has declined -40.37%, versus a -10.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.
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