The re-opening of Cineplex in Canada and the gradual opening of theatres in the U.S. set the stage for a rebound in theatre stocks. Cinemark (NYSE:CNK) is stuck in a $10 - $15 range since April. AMC Entertainment (AMC) is stuck in a range, too.
AMC stock has a strong chance of forming an uptrend. The company has a deal with Clorox (NYSE:CLX) to keep theatres clean. It renegotiated leases with its landlords and cut costs dramatically. AMC’s high leverage puts the company at risk of bankruptcy. Yet the refinancing of debt will delay that. As long as theatres reopen gradually, AMC, Cinemark, and Cineplex may survive.
The theatre business is at risk of breaking down if COVID-19 infections increase this Fall. Movie watching is still possible, as long as the audience is spaced apart and cleaning measures are taken.
Disney (NYSE:DIS), ViacomCBS (NASDAQ:VIAC), and WarnerMedia, an AT&T (NYSE:T) unit, have a vested interest in seeing theatres open again. Streaming movies may have high margins but low revenue potential for now. Families may pay $30 to stream Mulan but watching from home lacks the theatre appeal.
AMC has the highest return potential if its re-opening succeeds. Cinemark and Cineplex are also compelling rebound plays.
Disclosure: the author owns AMC stock
