(By Kevin Donovan) This generation of economically challenged Americans is responding much like its beleaguered forebear of the 1930s. When the goin' gets tough, the tough go to the movies. So with that escapist predilection in mind, we're buyers of all three movie theater chains on the eve of the summer blockbuster season.
Though we look with favor on all three, our order of preference is Cinemark (CNK), Regal Entertainment (RGC) and Carnike Cinema (CKEC), partly because of valuation and partly because of past performance. Carnike is the cheapest of the three on a price-to-earnings growth basis at 1.29 versus 1.56 for Cinemark and 2.19 for Regal Entertainment. However, Carnike is up more than 100% year to date, with Cinemark and Regal up 23% and 18%, respectively, so far in 2012. Carnike's run is probably not over, given the lower value on growth, but Cinemark and Regal have plenty of room to run once the country starts buzzing about boffo box office numbers in July.
With "The Avengers" already topping the $600 million mark worldwide this year, big comic book hero movies should keep the ball rolling. For the weekend beginning Friday, July 6, Box Office Mojo.com says "The Amazing Spiderman" is booked in more than 4,000 theaters nationwide on expectations of an "Avengers" type hit, with Oliver Stone's "Savages" slated for 2,800 theaters at last count.
The biggest draw this summer is likely to be the new Batman movie, Christopher Nolan's "The Dark Knight Rises," slated to premiere the July 20 weekend.
Regal said it will continuously show "The Dark Knight Rises" at 32 theaters around the clock to meet demand. So far Regal has sold out more than 100 auditoriums for the movie and keep adding screens and show times to meet demand as the film's opening date approaches.
"Weeks before the film's opening, Regal is already seeing incredible interest by Dark Knight fans for premium experiences such as IMAX. To accommodate, Regal Entertainment Group is adding show times throughout the night at many of our theatres for Regal's All Knight Long movie event," stated Greg Dunn, President and COO of Regal Entertainment Group. "Our digital cinema platform allows us to quickly add auditoriums in response to the increasing demand for tickets to the midnight premiere of ‘The Dark Knight Rises'."
Several Regal theaters have added shows to extend the All Knight Long screenings throughout the entire weekend. Markets where Regal is offering 72 hours of continuous shows include: Albany, Chicago, Houston, Los Angeles, New York, Philadelphia and San Francisco.
AMC, the country's second largest theater chain after Regal, said today it is adding some 4 a.m. showings of its Dark Knight Trilogy July 20. The event has already garnered ticket sales of more than 23,000, cranking up expectations for a hot season at the box office.
We think valuations of the theater owners are still reasonable and that the outlook for packing in customers this summer is brighter than anything else on the economic horizon. Once the box office figures start rolling in for the blockbusters, expect the buzz to push these stocks higher.