What happened
The market's spotlight shone on Cinemark Holdings (CNK 0.97%) on Wednesday. One pundit following the company's stock upgraded his recommendation, and on the back of that, its price rose by 1.4%. In pure percentage terms, that was almost exactly double the 0.74% increase of the S&P 500 index on the day.
So what
The analyst pulling the upgrade lever was B. Riley's Eric Wold. For him, Cinemark is now a buy with a price target of $23 per share. Previous to that, he ranked the movie theater operator only as a neutral, at a $20 price target.
Wold explained in a new research note that "we felt compelled to increase the valuation discount rate until we adjusted our 2024 estimates to reflect continued film slate risk stemming from the Writers Guild of America (WGA) strike."
The WGA is the labor organization comprised of the most prominent film and TV writers in the entertainment industry.
"With the pullback in shares since that time, the strong likelihood, in our opinion, of upside Q2 2023 results in early August, and confidence in continued over-indexing relative to the exhibition peer group, we are taking this opportunity to move off the sidelines," Wold added.
Now what
Not coincidentally, the B. Riley analyst's new take comes shortly after the broader U.S. cinema industry outperformed his expectations.
Last week Wold said that the second-quarter American box office take totaled just under $2.68 billion, which was $134 million higher than he had forecast. He pointed out that the quarterly figure marked the best recovery level since the coronavirus pandemic. No wonder he's more bullish on the industry generally and Cinemark specifically.
