Cinemark (NYSE:CNK) is expected to release financial results for the second quarter on Friday.
The average Revenue Estimate is $733.88M (+149.0% Y/Y), while the consensus EPS Estimate is $0.22 (+118.5% Y/Y).
Cinemark (NYSE:CNK) has outperformed revenue predictions 100% of the time, and EPS estimates 25% of the time over the past year.
EPS estimates have seen one upward revision and three downward revisions in the last three months. Six changes have been to the upside and four to the down.
Analysts Believe This is a Stock With Upside Potential
The release of Top Gun: Maverick has greatly benefited Cinemark’s (NYSE:CNK) stock and the more prominent movie theater business.
Box Office Mojo reports that as of August 1, 2022, the movie had made $650.3 million in domestic ticket sales and $671.6 million internationally, for a total of $1.32 billion worldwide sales.
However, investors must take the longer-term trajectory into account and understand that CNK continues to face financial difficulties.
To put it bluntly, the audience for movies is a fickle beast. Hollywood’s production studios occasionally get it right and occasionally get it wrong.
Therefore, believing that one movie will substantially alter the story surrounding Cinemark stock would be premature.
COVID-19 Pandemic Dealt the Industry Severe Damage
Cinemark’s revenue total of $1.51 billion in 2021 increased by 120 percent from the output in 2020. Additionally, the $461 million in sales in the first quarter of this year doubled those in the same time.
Cinemark’s recent sales aren’t very spectacular, though, when compared to pre-pandemic averages. For instance, extrapolating the $667 million in holiday-related sales from Q4 2021 to the entire year would result in revenue of $2.67 billion, less than 2017.
Ironically, despite Hollywood’s recent emphasis on expanding representation and elevating marginalized perspectives, the film business lacks diverse content. Production studios can no longer sustain a focus on the craft of filmmaking. Instead, they must focus nearly solely on the commercial aspect.
The top 10 domestic box office grossing movies from 2000 covered a variety of genres. The consumer environment at the time enabled content diversity, enabling everything from action flicks to comedies to even a biopic of American activist Erin Brockovich. Hollywood studios offered moviegoers precisely what they wanted because people were prepared to pay for art.
In 2019, the Situation Significantly Changed
Most of the top 10 grossing movies in this category were science fiction or comic book movies. Or, to put it another way, Hollywood needs to produce expensive summer blockbusters if it wants to compete in the modern entertainment industry.
Unfortunately, paying millions of dollars does not ensure box office success. Production studios will be particularly cautious about their exposure since when movies bomb, they can cause significant financial damage to their sponsors.
That’s not a compelling story for the Cinemark (NYSE:CNK) stock in the long run.
CNK: Wall Street’s Perspective
Wall Street has rated Cinemark (NYSE:CNK) stock as a Strong Buy based on four Buy recommendations made in the previous three months. The typical Cinemark price objective is $24.50, suggesting a 30% potential increase.
Featured Image: Megapixl © Wolterk
