Why Cinemark Should Be Aggressively Bought At These Levels

Loop Capital believes Cinemark Holdings, Inc. CNK should be bought aggressively at these levels given strong Q3 box office performance.

The brokerage maintained its Buy rating and $44 price target, which implies a potential upside of 15 percent.

The brokerage said Cinemark trades at an 11.1 percent discount to Regal Entertainment Group RGC, and a 9.7 percent discount to AMC Entertainment Holdings Inc AMC.

"With everything any GARP investor would want within this cap discipline – stellar unit growth, enviable cost management, consistent over-indexing, industry-leading margins, demand curves which continue to move to the right, a stable management team, and a robust dividend, we see no reason why CNK should not trade up to at least 9.0x projected 2017 EBITDA over the next 12 months, or the equivalent of $44.00," analyst David Miller wrote in a note.

Miller said it appears that Cinemark's Q3 top line admissions revenues finished up +12.1 percent on strong performance of Jason Bourne, Legend of Tarzan, The Secret Life of Pets, and Suicide Squad.

Miller believes Cinemark's top line admissions revenue, on a blended basis, with currency, finished up 10.9 percent. The analyst raised his Q3 core EPS estimate moves to $0.58 from $0.53 and net admissions revenue estimate to $478.7 million from $462.2 million, while aggregate revenue estimate to $779.2 million from $754.6 million.

The analyst also upped his Q3 aggregate EBITDA estimate (non-adjusted) to $189.3 million from $166.6 million, and core non-GAAP EPS estimate to $0.58 from $0.52. Consensus is $0.53, but the analyst said it's sure to move higher in the next 1-2 weeks.