Cineplex (TSX: CGX) had quite an eventful year, with a big return to the cinemas during the so-called Barbenheimer weekend, a weekend that saw two hit films in Oppenheimer and Barbie released. Indeed, Cineplex and the rest of the movie theatre industry need more weekends to match Barbenheimer. With Hollywood writer strikes causing turbulence in the streaming and theatre world, questions linger as to when the next Barbenheimer will be in the cards.
Despite the Barbenheimer hype, the stock hasn’t really budged, now up just north of 4% year to date.
Now that strikes have resolved, I think 2024 could be a year to get more optimistic about the Canadian movie theatre giant’s prospects. From 2020-21 COVID lockdowns to writer’s strikes, things may finally be looking up for the cinema scene.
Undoubtedly, video streamers have created quite a secular headwind for firms like Cineplex in recent years. Of course, Netflix (NASDAQ: NFLX) continues to be the king of at-home entertainment. That said, there are signs that things may have tilted too far on the streamers’ side. Indeed, we could see some reversion to the movie theatres once the next slate of big hits is due to release.
Source: Getty Images
Theatrical first releases are a huge plus for cinemas moving forward
I find it quite intriguing that Apple (NASDAQ: AAPL), which has its Apple TV+ streaming service, has gone the route of theatrical release before the launch of its streaming service. Killers of the Flower Moon and Napoleon are pretty exciting hit films. And you can bet that people will pay the price of admission to see the films, even if they are eventually destined for Apple TV+. By going theatrical first, I believe the streamers may be causing the tides to turn ever so slightly back in favour of the good, old-fashioned cinema.
Indeed, Cineplex can thank Apple (and other Netflix rivals) for the glimmer of hope heading into the new year.
As more films opt to go theatrical first rather than straight-to-streaming, I believe the roadmap for Cineplex stands to improve. Remember when video streaming was supposed to put an end to the expensive inconveniences of cable television?
Now that there are more streamers, some of which are embracing ads while jacking up prices and introducing new tiers, I think video streaming has peaked. It’s become quite the chore to juggle more than a handful of streaming services these days. Indeed, one has to check not only Netflix but also numerous platforms to find something to watch. In a way, I guess cable TV was more convenient than the current state of streaming!
In any case, I view the industry dynamic as favourable for firms like Cineplex, which flirted with disaster just a few years ago. Clearly, people still want to go out to see a movie. As long as there’s something that’s a high-quality hit with incredible visual effects, the movie theatre business will be doing just fine in the Netflix era.
Streaming vs. cinemas: Where do they go from here?
So, should investors opt to go against the grain with CGX stock? Or stick with NFLX as it continues its run into 2024?
After soaring nearly 70% in the past year, Netflix looks incredibly expensive, with shares going for 48.9 times trailing price to earnings.
Meanwhile, Cineplex stock continues to look dirt cheap at just $8 and change. Though there are more challenges to tackle, I’d rather be a buyer of CGX over NFLX. I think cinemas still have what it takes to shine again, thanks to growing competition in streaming.
