Why 'Barbenheimer' might not be enough to fuel a movie stock rally
JPMorgan this week downgraded its recommendation for Cinemark, pointing to a limited film supply outlook due to the SAG-AFTRA strike. The production schedules for several movies have already been impacted, the strategists wrote in a note to clients.
"Absent a resolution," analyst David Karnovsky wrote,"we expect the strike will remain an overhang to Cinemark shares and limit upside regardless of whether the box office outperforms near term." The S&P 500 has outperformed each of the four theater stocks since May, and extended turmoil in Hollywood threatens to weigh on the companies for the foreseeable future. Citing data from Boxoffice Pro, Bloomberg Intelligence lowered its outlook for the theater industry's revenue by 2%, to about $8.9 billion.
Earlier this month, the Screen Actors Guild announced a walkout after failing to reach a deal with the Alliance of Motion Picture & Television Producers. They joined the Writers Guild of America, which has been on strike since May. "Actors are no longer promoting their movies, creating a demand headwind," JPMorgan's Karnovsky wrote."The impact of this is difficult to quantify and will vary based on the film, though the recent underperformance of highlights the importance of effective marketing.
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