by 036Gooddaysir036
Introduction:
AMC Entertainment and Cinemark are the two largest U.S. theater companies.
- AMC is the largest theater chain in the U.S. and the world.
- AMC has acquired Carmike Cinemas along with the European Odeon and Nordic shortly thereafter.
- AMC operates 630+ theaters in the U.S. and 365 theaters in Europe.
- There are even plans for AMC to open theaters in Saudi Arabia.
- Cinemark is the second largest in the U.S.
- It operates 342 US theaters
- Operates 205 theaters across Latin America.
- In an interesting twist Cinemark has a 25% stake in National Cinemedia (NASDAQ: NCMI) (The focus for NCMI is advertising)
52 Week Highs/Lows:
- AMC High: $10.95 / Low 1.95$ – Currently trading at $3.04 (17 October)
- CNK High $37.83 / Low $5.71 – Currently trading at $7.86 (17 October)
Comparing the balance sheets (At a glance):
Before this comparison just some quick notes: Movie attendance has decreased gradually over the last 20 years. Both Cinemark and AMC have released rewards programs which has actually increased attendance in 2019 (And then a wild COVID appeared). Additionally both companies have increased their prices to bump up their revenues over the years. (Popcorn obv tastes better when you spend 500$ on it)
AMC has spend the last several years buying up Cinema chains (Lots of acquisitions in 2016-17), to fund this they loaded up on debt. So, naturally, COVID-19 has put the company in a very difficult spot.
- Last year the company had $340 million in interest payments.
- It’s debt totals over $5 billion. (As of last year)
- AMC is holding just $198.5 million in cash
- AMC has more theaters in high-rent locations compared to Cinemark – This lowers their revenue.
- Their current debt is 5x their current EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
AMC is currently in fund-raising mode, they have stated they have enough funds through the year and possibly a bit longer. Recently though AMC has made a deal with Universal. A step into the streaming market, especially during these lockdowns, could move the company in a brighter direction if they can weather their current conditions.
Cinemark, unlike AMC, has committed to more conservative growth, a move that puts Cinemark in an excellent position to weather the current COVID downturns.
- CNK has over $571.76 million in cash
- Additonally they have access to over $100 million in additional credit
- Their expenses total to ~$520 million if we lump their interest and lease payments. (Plus some other obligations I’m sure)
- Their current debt is ~2x their current EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
Cinemark has states they have enough money to last through 2021 comfortably. One important note, unlike AMC, Cinemark does not appear to have made move towards streaming services. This could impact their future revenues if theater attendance continues to decline more in favor for streaming.
The Takeaway:
This choice definitely comes down to personal risk tolerance, and depend on your view of the resiliency of the movie industry. Theaters have been on the decline for years, the reward programs have decreased this flow a bit, but how much will it continue to do so especially if people have unsubscribed from these to pinch pennies during COVID?
AMC is definitely the riskier of the two, they have tons of debt and Europe has seen less theater attendance than Latin America has for CNK. However if AMC survives (by its own means or government money), there is potential for stronger upside, especially since they are getting their foot in the door with universal.
Cinemark’s conservative growth is definitely paying off during this time. However, if AMC does survive then what will Cinemark’s moves be in the future to ensure their continues relevance as theaters continue to decline?
Final Thoughts:
Do I think these (AMC & CNK) are super long term holds? I am hesitant to say. Looking at a 1-2 year window I do believe they both have strong potential for profit. Beyond that it is difficult to say. AMC’s moves with universal could put the company on a new future path away from traditional theaters. It’ll be interesting to see where that goes and what Cinemark will do to move itself from a potentially dying market. If you buy definitely set stop-losses just incase, and/or plan an exit price.
Thankyou to all that have read this far. This is not all inclusive so please please do your own research to supplement the quick comparison here. Additionally thankyou to everyone who provided constructive comments on the AT&T post. That was definitely more of a controversial stock, it was interesting to hear everyone’s different takes.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.