04:46 PDT 5/5/2021
by
Georg Szalai
‘Consumers want to leave home and return to the theater,’ says Eric Wold, B. Riley, wondering if the tent pole’s success in theater ‘could possibly be an indication that Warner Bros. ‘made the wrong decision’ with its hybrid release strategy for its 2021 slate.
The theatrical performance of Godzilla teen Kong “Destroy long-standing concerns about theater window interest and show a solid path to revival” for cinema operators, Eric Wold, analyst at B. Riley Securities, argued in a report on Monday.
He also improved his rating on shares of AMC Theaters from ‘neutral’ to ‘buy’, raising his price target from $ 7 to $ 13.
The “impressive” domestic box office performance for the launch of Warner Bros. Godzilla teen Kong despite the coronavirus pandemic, the analyst noted that the film starts at $ 48.5 million, compared to Godzilla: King of the Monsters, which opened in May 2019 to $ 47.8 million “with all theaters open and without capacity constraints.”
By comparison, Wold emphasized that at this stage, the North American theater base is “only about 60 percent open” (including about 93 percent in the U.S. and about 24 percent in Canada), with theater capacity restrictions averaging 25 to 50 percent “concluding: “We feel these results are impressive. “
The Wall Street expert added: ‘We believe consumers want to leave home and return to the theater, and these results are very telling, especially as the film is available for free to HBO Max subscribers at the same time as the theater release. “
Wold takes this as a sign that domestic moviegoers are the lead of consumers in international markets. “Since the reopening of a handful of overseas exhibition markets last year (eg China, Japan, Australia), we are increasingly optimistic that the intensifying film trends within the market for the rest of the world will bode well as additional markets reopen and new Hollywood content makes it on screens. ‘He added that the fact that Godzilla teen Kong “better than expectations” and the predecessor film despite “severe capacity constraints” was a clear indication that consumers want to return to theaters, even with the onslaught of streaming options reaching homes. “
Wold also suggested that a series of “exclusive theater window agreements signed between exhibitors and studios over the past year,” including AMC and Cinemark, deal with Universal and Regal’s contract with Warner Bros., along with “indications from Paramount that ‘ n 45 an exclusive window is preferred “is a” positive indication that an exclusive theater window is preferred and necessary to achieve a successful film. “
The analyst even argued that the execution of the tent pole ‘could possibly be an indication that Warner Bros. ‘made the wrong decision’ with its hybrid approach to its 2021 lead, which combines theater and digital releases via HBO Max. “We were determined that Warner Bros. would change course and include an exclusive theater window for the upcoming film series,” Wold said.
Addressing AMC, he wrote: ‘We have been impressed by management’s ability to withstand the pandemic wind by both strengthening the balance and negotiating with landlords to improve the cash lane until 2022. And as the largest exhibitor in North America that also has the highest working number of premium Imax displays, we see that AMC is well positioned to take advantage of the projected industry revival and return to pre-pandemic attendance levels by 2023 . “With the ‘only concern and reason for the previous’ neutral ‘valuation” being high debt levels and the strain it could place on future cash flows, Wold concluded:’ With the increase in management that the ability and willingness to leverage equities to reduce debt, we can now be more constructive about the upward opportunity for equities. ‘