UPDATED with closing prices. Exhibition stocks, paced by Imax, moved higher today as investors reacted to explosive weekend box office in China. The hope on Wall Street, unlike the mirage that briefly quadrupled AMC’s market value amid the GameStop surge, is that Stateside theaters may soon see pent-up demand finally released.
Imax shares rose 6.5% to finish at $19.85 after briefly exceeding $20 for the first time since late-2019. AMC gained 1% to $5.65. Aside from the No. 1 global theater chain’s wild runup in late-January, its recent level between $5.50 and $6 compares with where it traded at the end of last summer amid a swell of moviegoing optimism.
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Cinemark climbed more than 3% to $21.28, its best showing since March 2020. Top in-theater ad firm National CineMedia tacked on 1% and Marcus Corp. was up a fraction. On the London Stock Exchange, Regal parent CineWorld added a bit more than 1% for the day.
While the Chinese New Year period is always a high point for box office in the region, the spectacular opening of Detective Chinatown 3 sent shockwaves around the global industry. The film’s $397 million debut surpassed that of Avengers: Endgame to become the biggest in any single market of all time. Imax also had a record-setting Chinese New Year opening weekend of $25 million, up 45% from 2019. (In 2020, China’s 70,000 screens were shuttered.)
The Global Cinema Federation, a volunteer-based trade group also noted the opening-day gross of $163 million also set a record, thanks to 93% of screens being open in China, according to analytics firm Gower Street.
Alejandro Ramirez Magaña, chairman of the GCF, said the Detective Chinatown 3 performance “is proof that moviegoing will come roaring back around the world as we move beyond this difficult time. Cinema unites us in a way that no other art form can, and the need to come together again is palpable.”
Wanda Cinemas’ John Zheng said the weekend showed that “Chinese moviegoers are sending a clear message that they missed the experience of gathering together to be entertained, and we know that moviegoers around the world will not be far behind.”
The scene is notably bleaker for now in North America, of course, with an estimated 44% of theaters able to operate due to ongoing coronavirus restrictions. The LA and New York markets have been closed for nearly a solid year. Nevertheless, many analysts covering Imax weighed in with effusive reactions based on the weekend wave, pointing to the company’s rising fortunes as a bellwether for exhibition in the West.
Chad Beynon of Macquarie reaffirmed his “outperform” rating on Imax stock. “In our view, this result showed ‘when open and safe,’ Imax continues to be the preferable way to view movies.” With an abundance of studio movies heading for streaming, he noted, the larger sweep of the Imax experience will be prized by moviegoers and enable the firm to avoid some of the stigma of regular exhibitors. Imax is also invested in cameras — Detective Chinatown 3 is the latest big-budget feature to use the company’s equipment in its production.
Eric Wold of B. Riley Securities has a “buy” rating on Imax shares, with a 12-month price target of $28. He said the company’s 6% share of all box office dollars in China last weekend is a sign of things to come. More broadly, he wrote in a note to clients, it proves the value of theaters in the media ecosystem after months of debate and shifts in release strategies.
The box office explosion in China, Wold wrote, “only demonstrates the power of the theatrical window for blockbuster films—and a reason to hold onto a film vs. pivoting too early to make the film available on streaming platforms. We also believe this highlights the box office opportunity for an exceptional portfolio of films that have been delayed from 2020 and early 2021 into the second half of 2021 and 2022.”
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