Insights

Why Cinemark Plunged Today

What happened

Shares of movie theater chain Cinemark Holdings (NYSE: CNK) were plummeting today, down 14.3% as of 2:11 p.m. ET.

Shares were lower following last night’s earnings report, even though the company beat revenue expectations. It might have had something to do with management’s commentary that the current quarter may be more challenged, thanks to an air pocket of new releases in August and September.

So what

Cinemark actually posted a relatively strong second quarter, with revenue up 152.6% to $744.1 million, beating analyst estimates, as the theater chain strongly recovered from the pandemic. Management also noted the company outperformed the industry recovery by 3 percentage points and 4 percentage points internationally.

The bottom line fell short of analyst expectations, as the company posted a loss of $0.61 per share. However, that was largely the result of a noncash impairment charge of $92.3 million. Without that charge, the $18.6 million second-quarter operating loss would have flipped to $73.7 million in positive operating income.

Yet as with so many earnings releases, the stock reaction wasn’t so much due to past numbers but rather forward guidance. In conjunction with the earning release, CEO Sean Gamble noted August and September would be more difficult, as there were fewer big releases before the busier fall and holiday seasons. Last quarter benefited from several high-quality blockbusters such as Top Gun: Maverick. With no such blockbuster in the cards for the late summer, investors are growing nervous about the fragile industry recovery.

Now what

Cinemark trades at a $2 billion market cap and around a $3.8 billion enterprise value. Prior to the pandemic in fiscal 2019, the company made around $191 million in net income, but those profit figures weren’t growing.

So even though theaters haven’t fully recovered yet, it appears investors have mostly anticipated things getting “back to normal.” As we’ve seen, the post-pandemic economy is still susceptible to inflation shocks, new COVID-19 variants, and other concerns such as Monkeypox. Oh, and the threat of streaming still looms over the theater industry, as it was prior to the pandemic. 

Therefore, it appears investors are right to be cautious these days, as the bumpier reality is colliding with expectations of a full theatergoing recovery.

Billy Duberstein has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Rebate Rewards

Level 2 Rebate

Deposit $2,000 and get $200 Rebate
$ 200 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $2,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $200 Rebate
Popular

Level 1 Rebate

Deposit $1,000 and get $100 Rebate
$ 100 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $1,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $100 Rebate

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex Securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here To Get Started
EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here For More Info