Will Cineplex Stock Ever Be a Buy Again?

man is enthralled with a movie in a theater

Cineplex (TSX:CGX) used to be a TSX stock that we talked about a lot here at the Motley Fool. It offered an enormous dividend yield and was in fact a Dividend Aristocrat. That was all before the pandemic hit, of course.

Now, with the market remaining a volatile place, and Cineplex stock a fraction of its share price before the pandemic, will it ever return to its former glory?

Summer was good, but was it good enough?

There is some good news for investors interested in Cineplex stock. After all, I don’t have to tell you how successful films such as Barbie and Oppenheimer were. These were hugely successful around the world, bringing Canadians back to the theatre.

In fact, it looked like the summer success rolled right into September for Cineplex stock. The company reported record third-quarter box office results. Box office revenue hit $34 million in September, outperforming the North American box office by 370 basis points!

Furthermore, this success was the second highest in the company’s history. But the big question is whether or not Cineplex stock can keep it up.

Earnings roll in

When earnings were released for the third quarter, Cineplex stock reported box office revenue of $188 million for the quarter. This was actually 106% of 2019 levels, meaning it did better than pre-pandemic norms! This was a huge success for the stock.

The results far exceeded expectations for analysts, as it wasn’t just box office revenue but even concession revenue that rose — all at a time when Canadians are supposed to be tightening their purse strings.

And while Barbie was a great success, there’s even more that could come. This includes the Taylor Swift: The Eras Tour release that could also see significant gains. Yet analysts still had some thoughts about whether this could save the stock and help it reach pre-pandemic share prices.

Analysts weigh in

Revenue rose 54% year over year, sure, but the fourth quarter is likely to be far more conservative in the opinion of analysts. That’s even with the Taylor Swift documentary on hand. Even so, projections for the next quarter look strong, along with the full year of 2024.

Revenue is expected to reach $1.672 billion for the year. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) could also reach $248 million. This would be huge, because, again, it would beat 2019 levels of $2217 million.

There is a major issue, however, and that was the writers’ strike. There could be a huge hiatus on films coming to theatre in the next few months and the next year. Even with the writers’ strike over, actors are still on strike. And until this comes to an end, the next year or two look rough.

Bottom line

Even with the positive notes from analysts, it doesn’t look like Cineplex stock is suddenly going to surge back to all-time highs. It could, however, outperform the market if production houses ramp up film production. If that happens, there could be some major growth for investors — growth that seems will continue the trend for Cineplex stock on the market today.

The post Will Cineplex Stock Ever Be a Buy Again? appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Cineplex?

Before you consider Cineplex, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in October 2023… and Cineplex wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 25 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks
* Returns as of 10/10/23

setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Cineplex. The Motley Fool has a disclosure policy.