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Analysts: AMC, Cinemark, Netflix Won't Suffer Greatly From Warner Bros.' 2021 Streaming Scheme

By Rhian Hunt - Dec 4, 2020 at 2:22PM

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The fears of cinema collapse are an "overreaction," there is no "death star," analysts say.

The share value of movie theater companies like AMC Entertainment Holdings ( AMC -4.19% ) and Cinemark Holdings ( CNK -2.10% ) dropped yesterday after AT&T's ( T 1.78% ) Warner Bros. division declared HBO Max will stream its entire lineup of 2021 films at no extra cost to HBO Max users. Shares of streaming content leader Netflix ( NFLX -2.33% ) also dipped yesterday as investors apparently expected HBO Max to challenge Netflix's premier position. Today, however, several Wall Street analysts have weighed in, saying the concerns are overblown.

Eric Wold of B. Riley Financial says the share price plunge for the physical theater operators is "likely to prove to be an overreaction" by the stock market. Wold cites the release of COVID-19 vaccines as probably causing a return to the theaters in the near future. He also says marketing expenses will push Warner Bros. to "abandon or meaningfully modify this new strategy" and expects a much more moderate effect on cinema profits than "initially feared."

A woman in a face mask and latex gloves selling movie theater popcorn against a background of red drapes.

Image source: Getty Images.

One analyst, Matthew Harrigan of Benchmark, went so far as to say Netflix will not experience significant problems from the Warner Bros. move. He remarked the "oft bumbling HBO Max is not exactly the Netflix 'death star,'" and boosted Netflix's price target to $492, though this remains slightly below the stock's current value of approximately $499.

Bloomberg reports cinema company executives responded swiftly to the Warner Bros. news. In an email, AMC CEO Adam Aron commented Warner seems to be "sacrificing" its movie division's profitability "to subsidize its HBO Max start-up." Cineworld Group ( CNNW.F -2.29% ), owner of the Regal Theater chain, says it anticipates reaching a positive negotiation outcome with Warner because it is "very encouraged by the giant steps achieved recently with regards to the Covid-19 vaccination process."

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
$29.01 (-4.19%) $-1.27
AT&T Inc. Stock Quote
AT&T Inc.
$23.46 (1.78%) $0.41
Netflix, Inc. Stock Quote
Netflix, Inc.
$602.13 (-2.33%) $-14.34
Cinemark Holdings, Inc. Stock Quote
Cinemark Holdings, Inc.
$15.42 (-2.10%) $0.33
Cineworld Group plc Stock Quote
Cineworld Group plc
$0.66 (-2.29%) $0.02

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