CineMark falls after analyst lowers rating

Shares of movie theater operator CineMark Holdings Inc. sank Tuesday after a Morgan Stanley analyst downgraded the stock, saying ticket sales in the second and third quarters could fall short of expectations.

Analyst Hunter DuBose downgraded the stock to "Equal weight" from "Overweight," and lowered his price target to $16 per share from $21. He said U.S. ticket sales may miss expectations over the next few months _ although he expects a strong fourth quarter.

CineMark shares lost $1.30, or 9.3 percent, to $12.68 in afternoon trading. DuBose lowered his revenue and profit estimates for the Plano, Texas, company, and said that in the years to come, the growing popularity of HDTV and Blu-Ray technology will make a larger dent in theater revenue.

The gap between the release of a movie in theaters and its release on DVD has also gotten smaller, he said, and that trend will continue.

DuBose thinks U.S. movie attendance will fall 2.8 percent in fiscal 2008, and remain flat over the next three years.

The contract between film and TV producers and Screen Actors Guild is set to expire on June 30, and DuBose added that the prospect of a strike is already hurting cinema operator stocks, and causing studios to hold off on the production of movies that would be interrupted by a strike. That could reduce movie attendance in 2009, he said.

Representatives of CineMark declined to comment.

The analyst added that shares of television programming company Discovery Holding Co. and outdoor advertising operator Lamar Advertising Co. have more growth potential than CineMark, at their current prices.