The COVID-19 pandemic wreaked havoc on the movie theatre business for roughly two years from the spring of 2020 onward. Cineplex (TSX:CGX), Canada’s largest cinema operator, was forced to close its doors in March 2020 and ate substantial losses. Fortunately, the company survived the storm. Now, in 2023, the environment is looking much brighter for Cineplex and the broader North American movie theatre market.
Today, I want to explore the current summer blockbuster climate and discuss how investors should respond to it. Let’s jump in.
Here’s why Barbenheimer could be a turning point for the movie theatre
On July 21, moviegoers flocked to the cinema for the debut of both Barbie and Oppenheimer. These two summer blockbusters have turned in top-six performances at the global box office. Barbie, the Margot Robbie-led fantasy-comedy, has generated over $1.1 billion in worldwide revenues. Meanwhile, Oppenheimer has gobbled up over $640 million in worldwide gross at the time of this writing.
These two films represent a departure from what box office monitors have been used to for roughly a decade — that is, the domination of mostly Disney-led superhero genre films and tried-and-true sequels like the Star Wars franchise. The success of riskier genre films like Barbie or historical epics like Oppenheimer could inspire industry leaders to shake things up in the quarters ahead.
Should this potential strategic shift entice investors to make a renewed bet on traditional cinema? It is not an outrageous suggestion, especially with the streaming space becoming oversaturated. Moreover, the ongoing WGA and SAG-AFTRA strike owes many of the stickier disagreements to the environment created by the rise of streaming services.
How has Cineplex performed as the box office has boomed?
Shares of Cineplex have dipped marginally month over month as of early afternoon trading on Tuesday, August 15. Meanwhile, this top Canadian cinema stock is still up 12% so far in 2023. Its shares have dropped 19% in the year-over-year period. Investors can see more of its recent performance with the interactive price chart below.
Should investors be pleased with its recent results?
This company released its second-quarter (Q2) fiscal 2023 earnings on August 10. Total revenues increased 20% year over year to $423 million. Meanwhile, Cineplex set records in box office revenues per patron of $12.84 and concession revenues per patron of $9.21. Theatre attendance also climbed 15% to 12.8 million.
Cineplex delivered revenue growth of 32% to $764 million in the first six months of fiscal 2023. Meanwhile, theatre attendance was also up 27% to 22.5 million. EBITDA stands for earnings before interest, taxes, depreciation, and amortization. The measure aims to give a clearer picture of a company’s profitability. Cineplex delivered adjusted EBITDA growth of 31% in Q2 to $102 million.
Why I’m buying Cineplex and betting on the resurgence of the movies
Overall, investors should be very pleased with a Q2 that illustrated the resurgence of the broader cinema industry. Cineplex is in a great position to take advantage of the continued rebound.
Cineplex currently possesses a very attractive price-to-earnings ratio of three. It just roared back to profitability, and the road ahead looks as promising as it has in many years.
