Cinemark shares rally following JPMorgan upgrade

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By Sam Boughedda

Cinemark Holdings (NYSE:CNK) was upgraded to Overweight from Neutral by JPMorgan on Thursday, with its price target unchanged at $15 per share.

Analysts there told investors in a research note that the recent sell-off, despite the successful Avatar run, leads to a better risk-reward for the stock.

"Following a 31% decline in shares since the beginning of December (vs. SPX -3%), we believe the risk/reward is more favorable to take a positive view on the stock. The sell-off we note was largely driven by the performance of Avatar: The Way of Water, which released on Dec 16th; while the opening weekend underperformed our expectation, the film has since demonstrated strong legs and is likely to end up in the top ten highest domestic grossing movies of all time," said the analysts.

They added that they believe the market has "drawn the wrong read-through to broader moviegoing" instead of seeing the Avatar sequel as "another proof point for resilient demand, especially amid a softening economy."

"Separately, we have a greater degree of confidence in our 2023 North America box office forecast following a film-by-film analysis of the slate, which leads us to project $8.487b of revenue for the industry (see our 2023 Box Office Outlook published today)," the analysts continued. "We additionally expect that a continued recovery in movie supply, larger theatrical commitments from streamers (mainly Amazon (NASDAQ:AMZN)), and price increases can lead to further growth long-term."

Cinemark shares are up more than 6% Thursday.