The late 2000s and 2010s saw the launch of the highest-grossing films of all time in the form of Avatar in 2009 and Avengers: Endgame in 2019. In between those successes, Disney appeared to be an unstoppable box office juggernaut as it reeled off multi-billion-dollar efforts thanks to releases from the Star Wars and Marvel Cinematic Universe. However, the spectre of Netflix and additional home entertainment options began to haunt the traditional cinema in the mid-to-late 2010s. Cineplex (TSX:CGX), the largest cinema operator in Canada, saw its shares peak in the summer of 2017 before succumbing to a steady decline.
Today, I want to look at three reasons Cineplex is a worthy purchase for Canadian investors as we approach the autumn season. Let’s jump in.
How has this stock performed over the past year?
Shares of Cineplex have dropped 12% month over month as of close on Monday, September 11. That has pushed its stock into negative territory, albeit marginally, so far in 2023. Its shares have plunged 15% year over year. Investors can see more of the stock’s recent and past performances with the interactive price chart below.
Cineplex has delivered strong earnings in recent quarters
This company released its second-quarter (Q2) fiscal 2023 earnings on August 10. Overall, Cineplex delivered a terrific quarter of earnings that should inspire confidence among Canadian investors. Theatre attendance rose 15% compared to the prior year to 12.8 million in Q2 2023. Meanwhile, theatre attendance rose 27% to 22.5 million customers in the first six months of the new fiscal year.
The increase in attendance fueled revenue growth of 20% to $423 million in Q2 2023. In the first half of 2023, Cineplex posted 32% revenue growth to $764 million. Box office revenues per patron (BPP) increased 4.5% to $12.84 in Q2 2023, and concession revenues per patron rose 4.2% to $9.21. EBITDA stands for earnings before interest, taxes, depreciation, and amortization; this metric aims to give a clearer picture of a company’s profitability. Cineplex posted adjusted EBITDA of $102 million — up 31% compared to the prior year.
This stock boasts nice value at the time of this writing
Cineplex stock currently possesses a price-to-earnings ratio of 2.7. That puts the TSX stock in very attractive value territory at the time of this writing. The company’s surge back to profitability makes Cineplex stock a terrific value addition as we approach the midway point in September 2023.
Cineplex and the cinema has stormed back to relevance in 2023!
Coming into the summer of 2023, The Super Mario Bros. Movie had put together the most impressive box office performance on the domestic and worldwide front. However, the biggest box office story of 2023 was the dual release of Barbie and Oppenheimer. These two distinct genre films managed to vastly perform expectations and capture the imagination of audiencegoers in North America and around the world.
Barbie has raked in $620 million at the domestic box office at the time of this writing. It has posted a $1.40 billion worldwide gross, becoming the top movie of the year. Oppenheimer held its own for a three-hour historical epic, pulling in $315 million at the domestic box office and $890 million worldwide.
Cineplex shareholders should look forward to the next batch of earnings, which will demonstrate the impact of the strong summer. More than that, the buzz generated by Barbie and Oppenheimer bode well for the future of the cinema.
