Regal Entertainment Stock Has $11 Upside On 'Breakout' Box Office

In a report published Thursday, Wunderlich analyst Matthew Harrigan maintained a Buy rating and price target of $31 on Regal Entertainment Group RGC. The analyst believes that the stock has "good defensive attributes" and is currently trading 17 percent below its recent high. "There is now a sense that the Minions opening could approach or surpass that for the animated debut of Toy Story 3 with a $100-$110mm vicinity US result," analyst Harrigan said, while stating that this would position the film in the "top-three day animated opening league." US box office collections for CQ2 came in 11.3 percent higher than for the same quarter in 2014. "Despite disappointing openings from Terminator Genisys and Magic Mike XXL, the July 4th weekend was up 13 percent year on year against easy comparisons and ytd box office is now up 6.9 percent," according to the Wunderlich report. In addition, the success of Jurassic World and Inside Out helped drive the Q2 results close to the original expectations. The analyst now expects the company's Q2 sales and adjusted EBITDA to grow 9.9 percent and 22.2 percent, respectively. There is unlikely to be any cash distribution from NCM LLC in Q2, although the analyst believes that payments would resume in Q3. "We continue to feel that there is simply no other alternative for the studios to maximize revenues per pair of eyeballs per viewing and marketing profile upon new film releases, as well as concomitant economics for following release windows for packaged media, streaming, and TV," analyst Harrigan added.