B.Riley shifts Cinemark stock to Neutral, noting limited upside potential

On Tuesday, B.Riley shifted its stance on Cinemark Holdings (NYSE:CNK), moving from a Buy rating to Neutral. The firm has established a price target of $31.00 for the movie theater company's shares.

This decision comes as the stock price approaches the target, having risen approximately 30% since the previous upgrade on July 7, 2024, from Neutral to Buy. This increase contrasts with the roughly 9% gain seen in the Russell 2000 index during the same period.

B.Riley's downgrade of Cinemark Holdings is not driven by any negative changes in their view of the company's fundamentals or the anticipated recovery of the domestic box office starting in 2025. Instead, the adjustment reflects the stock's current proximity to the firm's price target.

The unchanged price target of $31.00 is based on several key factors: a projected 19% year-over-year increase in domestic industry box office revenues during 2025, Cinemark's continued performance outpacing its peers, and the company's shares reaching a forward target multiple of 7.0 times B.Riley's 2025 AEBITDA estimate of $701 million. This estimate is higher than the consensus estimate of $687 million.

The firm acknowledges that if any of the three main drivers behind their price target do not materialize, the target may be seen as overly optimistic in the short term. B.Riley has indicated that they are open to reassessing their position on Cinemark Holdings. They are looking for either a more attractive entry point for the stock or additional reasons to be more positive about the valuation drivers they have identified.

The analysis provided by B.Riley suggests a cautious approach to Cinemark Holdings at the current price level. Investors are advised to be aware of the factors that could influence the stock's value going forward, particularly as the industry anticipates a recovery in the coming years. B.Riley will continue to monitor Cinemark Holdings and the broader market for developments that could impact their assessment and price target.

In other recent news, Cinemark Holdings delivered impressive second-quarter results, surpassing expectations. The company reported robust worldwide revenue of $734.2 million, driven by significant growth in admissions revenue and concession sales, which achieved a record high of $231.4 million. B.Riley and Jefferies, two analyst firms, have both upgraded Cinemark's price target in light of these positive results.

B.Riley maintains a Buy rating on Cinemark and increased the price target to $31.00, highlighting the company's ability to navigate disruptions and drive revenue growth. Similarly, Jefferies has also increased Cinemark's price target to $30.00, maintaining a Buy rating based on the company's potential for sustained growth and profitability.

These developments follow Cinemark's successful strategies in monetizing moviegoer attendance and effectively managing operational costs in a challenging economic environment. The company's ability to sustain box office share gains and improve theater-level margins has been noted by analysts.

Cinemark's recent performance and strategic financial management have contributed to an optimistic outlook for its future. The company also plans to repay $460 million of convertible notes in August 2025 and is considering returning excess capital to shareholders.

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