Market Overview

Wedbush's Michael Pachter Breaks Down This Year's Record Movie Theater Turnout

Wedbush's Michael Pachter Breaks Down This Year's Record Movie Theater Turnout

The first four months of 2018 saw the third highest-grossing movie of all time and the highest opening weekend ticket sales ever achieved by a film. 

Those milestones — reached by “Black Panther” and “Avengers: Infinity Wars,” respectively — both drove and testified to a robust, thriving theater scene, according to Wedbush analyst Michael Pachter.

“It’s clear that consumers will go to the movies when there’s something to see,” Pachter said Monday on Benzinga’s PreMarket Prep show.

By his assessment, bigger blockbusters are offsetting a smaller studio slate and driving traffic to movie exhibitors. “I do not see that [audience] declining,” Pachter said.

The Winners

That’s certainly good news for movie theaters.

Pachter anticipates a mere 0.5-percent annual decline in theater attendance over the next 20 years, with upticks in 2018 and 2019.

Based on his model, a relatively flat box office justifies stock valuations 10 times better than earnings before interest, taxes, depreciation and amortization. With most theaters trading under eight turns, the industry could see 25-percent upside across the board, Pachter said. 

Here’s what the Wedbush analyst said about individual players:

  • Imax Corp (USA) (NYSE: IMAX) could outperform expectations because of its unique global expansion.
  • AMC Entertainment Holdings Inc (NYSE: AMC) has more downside risk than peers because of its debt, “but you get rewarded if the box office is sustainable.”
  • Cinemark Holdings, Inc. (NYSE: CNK) has less upside potential but also less downside risk, “so if you’re risk-averse, that’s a better play.”

The Loser

Helios and Matheson Analytics Inc (NASDAQ: HMNY) is an unprofitable concept in a strong theater landscape, Pachter said. By the analyst's assessment, the firm’s MoviePass subscription service depends on declines in attendance.

Considering anticipated theater traffic, the analyst said he views MoviePass’ $10-per-month product as unprofitable, regardless of whether it provides 30 movies or just four.

“MoviePass is a joke and I think will be out of business in 18 months, if not sooner,” Pachter said.

Analyst: OTT Not A Threat 

Not even Netflix, Inc. (NASDAQ: NFLX) original content can keep people away from the theaters.

“Netflix has no impact on movie attendance,” Pachter said.

“Netflix’s films like ‘Bright’ and ‘Cloverfield Paradox,’ those are just not movies you’ve heard of or you care to go see, and you wouldn’t have seen them had they been in the theaters.”

Netflix will never produce a film with a budget or star power competitive with the likes of “Avengers," Pachter said. 

PreMarket Prep is a daily trading show hosted by prop trader Dennis Dick and former floor trader Joel Elconin. You can watch PreMarket Prep live every day from 8-9 a.m. ET here. The replay can be found on Benzinga's YouTube channel, and the podcast is on iTunes, Soundcloud and Stitcher.

Related Links:

How Netflix Defied Cannes Tradition, Miffed Cinephiles And Forced A Rule Change

Canaccord Analyst: MoviePass Could Be The Catalyst A Stale Movie Theater Sector Needs

Posted-In: Avengers Avengers: Infinity War Black PantherAnalyst Color Top Stories Analyst Ratings Trading Ideas Interview Best of Benzinga


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