Actors strike to limit Cinemark upside – JPMorgan

Cinemark Holdings (NYSE:CNK) was downgraded to Neutral from Overweight at JPMorgan on Wednesday, with analysts also lowering the price target for the stock to $18 from $21 per share.

They told investors in a note that the downgrade is due to the actors’ strike limiting the film supply outlook. A union representing about 160,000 Hollywood actors went on strike last week after failing to reach a deal with Hollywood’s biggest studios.

“While we think the industry has demonstrated an ability to run at ~$8.5-9.0b of gross revenue, we estimate further improvement will require more wide releases,” the analysts wrote. “Visibility into this, however, is now limited by the SAG-AFTRA strike, which has already shut down production for several films slated for 2H’24.”

“The ultimate read-through to theaters will be a function of the length of the strike, though our early sense is that fundamental differences remain between the unions and AMPTP, with the dynamic further complicated by conflicting goals and priorities among the major studios and streamers,” they added.

If no resolution is found, JPMorgan expects the strike to remain an overhang to CNK shares and limit upside regardless of whether the box office outperforms near term or if the company posts better-than-expected results.