Wedbush bullish on AMC and Cinemark as industry recovers, movie releases stabilize

Wedbush upgraded AMC and Cinemark from "neutral" to "outperform," driven by expectations of a more stable release schedule in the coming quarters, which positively impacted their stock prices.

AMC has alleviated concerns around its financial outlook by repaying or deferring 2026 debt, while also focusing investments on high-performing theaters to enhance revenue and strengthen its balance sheet.

Cinemark is expected to reduce its debt significantly and maintain competitiveness through strategic investments and a strong loyalty program, potentially offering cash returns to shareholders by 2025.

Overall, while Wedbush anticipates a stabilized box office environment in the near term, they forecast low growth in the industry for the coming years, with mid-to-high single-digit growth rates projected.

Recommendation Rating: Positive Outlook for AMC and Cinemark

Wedbush has upgraded its investment ratings for movie theater operators AMC Entertainment (NYSE: AMC) and Cinemark (NYSE: CNK), moving from "neutral" to "outperform." This change reflects the analysts' view that both companies will benefit from a more stable release schedule over the next several quarters.

In premarket trading on Friday, AMC's stock increased by nearly 8%, while Cinemark saw a modest rise of 1.5%.

Alicia Reese, leading the analysis team, indicated that AMC is primed to capture greater market share in North America and the UK/EU by 2025 and 2026. The company has successfully repaid or deferred all its 2026 debt, alleviating some of the apprehensions surrounding its short-term financial outlook.

Wedbush noted, "AMC will continue to close underperforming locations as it strengthens its balance sheet in 2025 while focusing investments on its highest-performing theaters to enhance revenue per screen, which is already trending 3% above 2019 levels even before additional investments." They forecast that, with a more reliable box office in the upcoming quarters, AMC's EBITDA will likely cover its interest expenses, reducing the necessity to issue new shares.

For Cinemark, the research firm highlighted that as the company nears the deadline for its convertible debt repayments next month, it will reduce its debt by almost 20% with minimal share dilution.

Furthermore, they expect Cinemark to maintain a competitive edge through strategic theater investments while reserving capital for new developments and potential mergers and acquisitions.

Wedbush commented, "We believe Cinemark will sustain its market presence in 2025 by utilizing its 30 million loyalty program members, encouraging them to visit its high-quality theaters with greater frequency."

The firm also anticipates that CNK will start distributing cash to shareholders by 2025, which may include dividends and share buybacks.

Regarding the overall recovery of the box office, Wedbush forecasts a more stabilized environment for the next several quarters but does not predict significant growth for 2025, 2026, or the years that follow.

"This is a low-growth industry in the midst of a recovery period. Over the next few years, we expect mid-to-high single-digit growth rates in box office revenue, followed by low-to-mid single-digit growth rates thereafter."

Currently, the price target for AMC is set at $4, indicating a potential upside of 35.6%, while Cinemark has a price target of $37, suggesting a 28.4% upside.