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Why National CineMedia Stock Tanked 10% Today

By Rich Smith - Sep 8, 2020 at 2:00PM

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The opening weekend box office for "Tenet" was tenuous.

What happened

It's Tuesday, the stock market is back in session, and National CineMedia (NCMI -2.81%) stock is down 9% as of 1:20 p.m. EDT after being down 10% earlier in the day.

This is not the kind of result you'd expect from a stock that's just been upgraded and had its price target hiked on Wall Street.

Darkened empty movie theater with floor littered with popcorn

Image source: Getty Images.

So what

On Friday, Barrington Research upgraded National CineMedia shares to "outperform" with a $5.50 price target, predicting that the movie advertising and entertainment pre-show company's shares will benefit from a broad reopening of movie theaters. Four days later, reports that B. Riley FBR has raised its price target even further, to $6 a share, calling the cinema reopening "solid" and saying National CineMedia has a "robust" pipeline of advertising to show moviegoers.

Now what

Of course, first, they need people to go to the movies to see those ads -- and that's where the problem may lie.

Movie theater chains AMC, Cinemark, and Regal Entertainment (owned by Cineworld) have all begun reopening their theaters in hopes consumers will swarm to see the latest Christopher Nolan flick, Tenet. But Deadline reports that Tenet took in only $20.2 million in box office receipts in its opening weekend -- and this is with 70% of AMC theaters, for example, now reopened.  

Compare that money-haul to the $60 million theaters rang up for Inception in its opening weekend 10 years ago, or even the $47 million Interstellar collected five years ago, and it quickly becomes apparent that theater audiences aren't as large as they once were.  

And this, in a nutshell, is why National CineMedia stock is going down today.

Rich Smith 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

National CineMedia, Inc. Stock Quote
National CineMedia, Inc.
$1.73 (-2.81%) $0.05
Cinemark Holdings, Inc. Stock Quote
Cinemark Holdings, Inc.
$16.75 (-13.44%) $-2.60
AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
$22.18 (18.86%) $3.52
Cineworld Group plc Stock Quote
Cineworld Group plc
$0.28 (10.64%) $0.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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