What happened

Shares of National Cinemedia (NASDAQ:NCMI) jumped today after the operator of a movie theater advertising network got an analyst upgrade, sparking a wave of bullishness on the beaten-down cinema play.

As of 2:58 p.m. EDT, the stock was up 29.4%.

A movie theater with a blank screen and an audience

Image source: Getty Images.

So what

Barrington analyst James Goss lifted his rating from neutral to outperform on the cinema advertising company and gave it a price target of $5.50, up about 50% from where the stock closed yesterday. Goss acknowledged that a return to normal would take time, saying that 2021 would be a transitional year for the company but the business should make a full recovery by 2022. He also said that digital initiatives would increase the company's opportunities as the industry reopened.

The news comes as movie theaters have started reopening across the country with Labor Day weekend, which includes the release of Tenet, expected to be a big test for the box office and movie theater demand.

Now what

National Cinemedia shares have fallen as much as 70% this year, with the stock currently down 37% year to date. While the stock still has potential as a recovery play, the movie theater industry may have been irreparably damaged by the pandemic. Studios like Universal and Disney have started releasing films directly to consumers through streaming and on-demand services, and Universal managed to negotiate down the theatrical window with AMC Entertainment, from 75 days to just 17. Though National Cinemedia investors are surely glad to see theaters reopen, there remain some stiff headwinds ahead.

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