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Investing.com - Wedbush has upgraded Cinemark Holdings (NYSE:CNK) from Neutral to Outperform, raising its price target to $37.00 from $32.00 as the theater chain prepares to reduce its debt load. The stock, currently trading at $29.85, has demonstrated strong momentum with a 39% return over the past year, according to InvestingPro data.
The upgrade reflects Cinemark’s anticipated benefits from a more consistent movie release schedule over the coming quarters and its approaching convertible debt repayment next month, which will reduce the company’s debt by nearly 20% with minimal dilution while maintaining its leverage ratio between 2-3x.
Wedbush highlighted Cinemark’s strategic investments in theater technology, particularly laser projectors, which position the company ahead of competitors, while also noting the company has earmarked cash for new construction and potential M&A opportunities.
The research firm expects Cinemark to resume returning cash to shareholders in 2025 through its recently reinstated quarterly dividend of $0.08 per share, which could increase in the near term, and likely through share repurchases as well.
Wedbush believes Cinemark should trade at an 8x EV-to-EBITDA multiple, citing the company’s ability to leverage its 30 million loyalty members, growing free cash flow, and reduced debt, though it cautions that substantial growth is not expected, projecting mid-to-high single-digit box office revenue growth over the next few years followed by lower growth rates thereafter. Currently trading at a P/E ratio of 14.8x and showing signs of being slightly undervalued based on InvestingPro’s Fair Value analysis, the stock offers 8 additional ProTips and comprehensive financial metrics available through the Pro Research Report.
In other recent news, Cinemark Holdings has been the subject of several key developments. Benchmark has reiterated its Buy rating on Cinemark, raising its Q2 revenue estimates to $948 million and adjusted EBITDA to $228 million, influenced by a 36.5% year-over-year domestic admission growth per screen. Meanwhile, B.Riley initiated coverage with a Neutral rating and a $35 price target, noting Cinemark’s strong financial structure and potential for solid revenue growth. In contrast, Goldman Sachs maintained a Sell rating, setting a $22 price target, despite Cinemark’s Q1 revenue surpassing expectations at $541 million. The company reported a Q1 EPS loss of $0.32, missing forecasts, but exceeded revenue predictions, driven by strong performances like the Minecraft movie. Additionally, Cinemark announced the election of board members and the approval of executive compensation during its Annual Meeting of Stockholders. The firm has also initiated a $200 million stock buyback program, addressing potential dilution from an upcoming convertible security.
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