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Why Cinemark Stock Jumped Today

By Evan Niu, CFA - May 26, 2020 at 1:11PM

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Imperial Capital reiterated an outperform rating on the movie theater operator.

What happened

Shares of Cinemark Holdings (CNK -1.21%) have jumped today, up by 9% as of 12:10 p.m. EDT, after the theater operator received a bullish rating from Wall Street. Imperial Capital reiterated an outperform rating on Cinemark stock.

So what

Analyst David Miller tweaked his price target on shares, lowering his valuation estimate from $26 to $24 based on reduced estimates for the company's operations in Brazil due to worsening coronavirus conditions in the country. Brazil has become the second-hardest hit country behind the U.S., with approximately 375,000 cases of COVID-19 and over 23,000 deaths as of Monday. Cinemark is the largest theater chain in Brazil, with 86 theaters operating 633 total screens.

An empty movie theatre

People aren't going to movie theaters during the COVID-19 pandemic. Image source: Getty Images.

President Jair Bolsonaro has been pushing to reopen the economy despite the dire figures. The U.S. government recently announced new travel restrictions related to Brazil that take effect tomorrow in an effort to limit the disease's spread coming from that country.

Now what

However, COVID-19 continues to spread aggressively across Latin America, which could represent ongoing risk for Cinemark. The consumer discretionary company has invested heavily in its footprint in the region, operating theaters in 14 of the 20 largest metropolitan markets in South America. Beyond Brazil, Cinemark has locations in other nearby countries like Argentina (191 screens), Colombia (207 screens), Peru (102 screens), and Chile (127 screens).

Imperial Capital's reduced price target still represents more than 70% upside from Friday's closing price.

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