It is no secret that the cinema industry has been hit hard by the Covid-19 pandemic. But at the box office, there was a solid rebound as economies reopened around the world, production schedules returned to normal and audiences returned to the theatre experience.
If you’re wondering which companies are in the best position to profit from theatrical films and film performances, keep reading.
Image source: Getty Images.
Best cinema stocks
Best cinema stocks
Here are some interesting cinema stocks that investors should consider:
1. Imax
1. Imax
imax (imax 0.52%) is known for its proprietary screen technology that licenses exhibitors, including AMC. The company has an asset-lit business model, and does not have to build or maintain theatre. The IMAX license includes intellectual property and technology that enables large screens to view movies.
Another competitive advantage is that the company’s premium screen allows exhibitors to charge a higher ticket price to many movie fans who are willing to pay more for an immersive experience. This feature can become increasingly valuable as cinema chains compete with and adapt to streaming services. A generation of around $1.7 billion in ticket sales for Inside Out 2 and a total of around $1.3 billion in Deadpool & Wolverine’s roughly $1.3 billion indicates that people are still hungry for the theatrical experience. Avatar: The 2025 release, which includes Fire and Ash and Zootopia 2, was able to once again highlight the value of IMAX’s technology and services.
The theater business focuses on a large budget special rich film that benefits from IMAX’s premium viewing format. IMAX is also financially strong and has more cash on its balance sheet than its obligations, taking into account the impact of the pandemic.
2. Disney
2. Walt Disney Company
Walt Disney Company (dis -1.1%) It’s not purely play cinema stocks, but few companies are in a better position to make a profit if the theatre industry experiences a strong recovery. Before the pandemic, Disney dominated the box office, so Mouse House will undoubtedly continue to shape the future of films.
The company released only three films in 2024, totaling at least $1 billion at the global box office. Disney could again gross at the box office thanks to a big sequel to the series, including Avatar, Zootopia and the Marvel Cinematic Universe (MCU).
With a wealth of popular characters and mega franchises, including MCU and Star Wars, the company’s stable content is unparalleled. Of the top 10 best-selling films at the global box office, eight were produced or co-produced directly by Disney.
Also, the diverse nature of Disney’s business makes the company a less risky investment than purely play cinema stocks. If the theatre segment is weakened, the company’s popular Disney+ streaming service should be able to benefit from the continued growth in demand for streaming media. Disney parks, resorts and media networks also work well, as the Media Empire has many lucrative channels to monetize its characters and content.
One stock to avoid
One Stock to Avoid: AMC Entertainment
AMC Entertainment (AMC 0.0%)The world’s largest cinema chain. At an astonishing turn of events, the stock has recorded impressive returns over the past few years despite its challenging industry background and weak business performance.
AMC stock price rose sharply in early 2021. This is because of a short filter, stocks have become a favorite among retail investors on Reddit and other social media hubs. Stocks have fallen sharply amid memestock enthusiasm, but business challenges and valuation concerns remain.
With long-term debts exceeding $4 billion, even if cinema chains sell more inventory, they will pay it off and charge a significant interest expense. The business recorded huge losses during the pandemic, but was unable to recruit in 2019 either. This business should record significant losses in 2023 and 2024 and show that there is a reliable path to profit.
While AMC is no longer trading at a high meme stock level, the company’s poor business fundamentals suggest that the stock may continue to struggle. The cinema industry should have some strong bright spots this year, but AMC’s debt and ongoing losses can make it difficult for stocks to gather.
Related Investment Topics
trend
Trends in the cinema industry
Due to the Covid-19 pandemic, major theatre chains were closed for several months and operated with limited capacity longer. The pandemic has also affected the film’s production and release schedule. While these pressures are largely lifted now, the cinema industry faces serious long-term challenges.
The growth of streaming services is reducing the value proposition offered by films. Instead of using traditional cinemas, some large film production companies, including Disney, have chosen to release major films via direct consumer-to-consumer streaming channels. Other competing entertainment options include video games and social media.
Meanwhile, the theatre chain offers new experiences, including high quality seating and dining experiences. They can distinguish cinema experiences from home viewing, but it is unlikely to replace the demand for streaming distribution services.
Cinema ticket sales will likely rise thanks to the 2025 movie slate that looks more commercially stronger than 2024. Some cinema stocks could work well in 2025 despite long-term challenges for the wider industry. Still, investors need to approach the theatre industry with caution.
Keith Noonan has a job at Walt Disney. Motley Fool has taken a job at Walt Disney and recommends. Motley Fools have a disclosure policy.
