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Cinemark Holdings Faces Near-Term Challenges Amidst Actors Strike, Says JPMorgan
The Impact of the Actors Strike
JPMorgan analyst David Karnovsky has downgraded Cinemark Holdings, expressing concerns over the actors strike in Hollywood. Karnovsky believes that the strike will have a significant near-term impact on Cinemark shares, limiting the visibility of box office performance. While the duration of the strike will ultimately determine the extent of its consequences, there are fundamental differences between the unions and the Alliance of Motion Picture and Television Producers that may impede a quick resolution. As a result, the strike is expected to exert downward pressure on CNK shares and restrict potential upside.
The Effects on the Movie Industry
Last week, Hollywood actors took to the picket lines after facing obstacles in negotiations regarding wages, residuals, and the use of artificial intelligence. As a result, production on several highly-anticipated movies scheduled for release next year has been halted, and actors are no longer able to promote upcoming films. This strike marks the first joint action by actors and writers in over sixty years. Given the current circumstances, JPMorgan notes that the industry would require more wide releases to sustain and improve its current gross revenue.
JPMorgan Adjusts Price Target, Reflecting Near-Term Challenges
Despite a strong performance by Cinemark in 2023, with shares surging nearly 78%, JPMorgan has adjusted its price target for the company. The new target of $18 per share reflects a 17% upside from the previous day's closing price. This adjustment is made in light of the near-term headwinds caused by the actors strike and the resulting uncertainty surrounding box office performance. As a result of this downgrade, shares of Cinemark fell by almost 4% before the market opened.
In summary, JPMorgan's downgrade of Cinemark Holdings is based on concerns over the near-term impact of the actors strike on box office visibility. The strike, which has halted production on several upcoming movies, has led to fundamental differences in negotiations between the unions and the Alliance of Motion Picture and Television Producers. As a result, JPMorgan expects CNK shares to be weighed down by this strike, limiting potential upside. However, despite the downgrade, Cinemark had a strong performance in 2023, and JPMorgan still sees some upside for the company, reflected in their adjusted price target of $18 per share.
Potential Impact on New Business
The ongoing actors strike and its impact on Cinemark Holdings highlighted by JPMorgan may have implications for a new business looking to enter the movie industry. The strike has resulted in halted production and limited promotional opportunities for upcoming movies, creating challenges for established players like Cinemark and others in the industry.
For a new business planning to enter the movie industry, this situation presents both risks and possible opportunities. On the one hand, the strike-induced uncertainties and potential decline in box office performance could make it difficult to gauge the market or predict revenue streams. This introduces more significant risks for a new business that may already have limited resources and market presence.
On the other hand, the strike may create a void in the market that a new business could potentially fill. With established studios experiencing production delays and limited releases, there may be an opportunity for a fresh and innovative approach to capture audience attention. By offering unique content or alternative distribution methods, a new business could potentially attract audiences and gain a competitive advantage during this challenging period.
However, it is worth noting that entering the movie industry during a strike requires careful consideration and strategic planning. The uncertainties and potential disruptions caused by the strike should be thoroughly assessed, and contingency plans must be in place to mitigate risks and adapt to the ever-changing landscape.
In conclusion, while the actors strike may present significant challenges for Cinemark Holdings and the movie industry as a whole, it also offers potential opportunities for a new business willing to navigate the current climate creatively. By understanding the market dynamics and devising a well-thought-out strategy, a new business could find its niche and thrive amidst the ongoing strike.
Article First Published at: https://www.cnbc.com/2023/07/19/jpmorgan-downgrades-this-movie-theater-chain-citing-actors-strike.html
