On Wednesday, Roth/MKM maintained a Neutral rating on Cinemark Holdings (NYSE:CNK) while increasing the share price target to $19.00 from the previous $17.00. The adjustment follows a stronger than anticipated performance in the first quarter box office results. The firm acknowledged the outperformance but anticipates it will take another two quarters before the industry begins to see significant strengthening.
The analyst from Roth/MKM expressed optimism about the future, citing the years 2025 and 2026 as potentially strong periods that could act as a catalyst for Cinemark's recovery narrative. Despite the positive long-term outlook, the firm suggests that it is too early for a more constructive stance given the limited near-term catalysts.
The revised price target to $19.00 is based on a multiple of 7x the firm's two-year average adjusted EBITDA forecast. This revision comes as the first quarter concluded above initial projections, prompting Roth/MKM to adjust their revenue and adjusted EBITDA estimates upward to $563 million and $55 million, respectively. These figures represent a year-over-year decline but are ahead of the consensus estimates of $545 million in revenue and $50 million in adjusted EBITDA.
The firm's updated estimates reflect a smaller than expected domestic box office decline of 6.5%, compared to the previously projected 9% drop. With the higher revenue, Roth/MKM anticipates an adjusted EBITDA margin of 9.7%, which is an improvement from their earlier estimate of 6.8%, yet still below last year's margin of 14.1%.
InvestingPro Insights
Following the Roth/MKM's neutral stance on Cinemark Holdings (NYSE:CNK) with an increased price target, the InvestingPro platform provides additional metrics and insights that could be valuable for investors considering CNK's stock. With a market capitalization of $2.33 billion and a P/E ratio of 12.39, Cinink is positioned as a significant player in the entertainment industry. The company's revenue has shown impressive growth over the last twelve months as of Q1 2023, with a 24.93% increase, highlighting its potential for scalability and market capture.
InvestingPro Tips indicate that Cinemark has a perfect Piotroski Score of 9, suggesting strong financial health, and also boasts a high shareholder yield, which may appeal to investors looking for companies with a track record of returning value to shareholders. Another point to consider is that Cinemark's stock price movements have been quite volatile, which could be a factor for risk-averse investors. However, it's noteworthy that the company's liquid assets exceed its short-term obligations, providing a cushion for operational flexibility.
For those interested in deeper analysis, InvestingPro offers additional tips on Cinemark, including insights into earnings revisions, net income expectations, and trading multiples. To access these insights and more, investors can visit https://www.investing.com/pro/CNK and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 6 more InvestingPro Tips available for Cinemark on the platform, which could further inform investment decisions.
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