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Layoffs at Cinemark Highlight the Dire State of the Movie Theater Industry

By Keith Noonan – Apr 15, 2020 at 10:42AM

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Movie theater stocks now trade at what would have previously been basement-level valuations, but it's unclear whether they're actually good values.

Cinemark Holdings' (CNK -3.51%) most recent filing with the Securities and Exchange Commission show the company had laid off 17,500 workers and furloughed half of its corporate employees at a 20% pay rate, according to a report from TheWrap. The drastic layoffs and pay reductions at the company are just the latest sign of the perilous state of the movie-theater business amid closures stemming from the novel coronavirus pandemic. 

Cinemark is far from the only theater company feeling the heat. Reports suggest AMC Entertainment (AMC -1.83%) is likely to file for bankruptcy as a result of pressures stemming from the crisis, and most major theater chains have been hit with stock and credit-rating downgrades due to the fact that there's little visibility as to when or whether business for the industry might return to normal. 

Empty theater seats.

Image source: Getty Images.

What's next for the movie theater industry?

Many movie theater chains were already facing pressure from streaming video competition and movie production companies pushing for a bigger chunk of ticket sales or preferential showcasing, and it looks like the novel coronavirus pandemic will have a prolonged impact on the industry. Even if business restrictions are lifted and cinemas are allowed to reopen, there's a fair chance people will be less inclined to visit movie theaters.

Some reports suggest businesses could reopen at some point within the next couple of months and pave the way to a state of normalcy, but a report from the Harvard School of Public Health indicates some degree of social-distancing measures could be needed into 2022. To put it in simple terms, things have never looked worse for the movie theater industry.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Cinemark Holdings, Inc. Stock Quote
Cinemark Holdings, Inc.
CNK
$12.11 (-3.51%) $0.44
AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
AMC
$6.97 (-1.83%) $0.13

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