Wedbush On Theater Stocks: Favors AMC, Regal Over Carmike, Cinemark

Wedbush has reviewed theater stocks and picked AMC Entertainment Holdings Inc AMC and Regal Entertainment Group RGC to outperform the market. The brokerage prefers to be Neutral on Carmike Cinemas, Inc. CKEC and Cinemark Holdings, Inc. CNK.

Analysts Michael Pachter and Alicia Reese believe AMC has a number of growth drivers that will ensure adjusted EBITDA grows for several years. The company is also in the process of closing the transaction of Carmike and Odeon acquisition before the current year ends.

Related Link: Wedbush Reiterates Outperform On AMC Entertainment Ahead Of Q3 Earnings

In a research note, Wedbush said, "We anticipate the consolidated entity to grow EBITDA substantially in 2018, given the timing of the intended theater upgrades. Additionally, AMC rebuilt its domestic marketing platform AMC Stubs with great success, seeing a 42 percent membership increase in its first two months."

As far as Regal, the brokerage thinks the company has sped up its initiatives on modernization apart from extending its footprint. Wedbush is not worried about the drop in admission revenue over the next couple of quarters since it expects high margin concessions per cap to continue its uptick.

On Cinemark, the lead analyst thinks that currency translation continued to impact its results thus affecting valuation. However, the situation seems to be easing out.

Ratings And Price Targets

• AMC: Outperform rated, $40 price target.
• Carmike: Neutral rated, $33 price target.
• Cinemark: Neutral rated, $40 price target.
• Regal: Outperform rated, $25 price target.

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