By Airielle Lowe and Katrina Lewis
A rally in movie-theater operators will be put to the test as the debut of Walt Disney Co.’s The Little Mermaid provides the latest gauge of movie-going demand after the Covid-19 pandemic.
Five operators, including AMC Entertainment Holdings Inc. and IMAX Corp., have gained an average of 33% so far this year. Cinemark Holdings Inc. leads the pack, up 95% year to date, though the group’s rally has cooled since a pop following April’s The Super Mario Bros. Movie debut. Now, investors will see if The Little Mermaid, which releases Friday, can attract the crowds needed to build on that momentum.
“I wouldn’t normally expect one movie to necessarily move theater stocks in one direction or another,” said B. Riley Securities analyst Eric Wold. But given that children and families have been “underrepresented” at the box office recently, “this could be a key piece to driving confidence in the industry’s recovery.”
Movie stocks are finally starting to show signs of life after the pandemic upended the cinema industry, with last month’s Super Mario Bros. debut scoring the biggest opening weekend for a film in 2023 and sending movie-theater stocks soaring.
The Little Mermaid should easily top domestic box-office charts in its holiday weekend debut, according to Bloomberg Intelligence analyst Kevin Near. It’s expected to bring in between $120 million and $155 million during the weekend that includes Memorial Day, Near said, citing Boxoffice Pro data. That would be close to the record set by Top Gun: Maverick which brought in more than $160 million during the Memorial Day weekend last year.
Domestically, The Little Mermaid grossed $10.3 million in previews, which began Wednesday, according to figures from the studio. Theater stocks are trading mostly higher on Friday, with AMC and Cinemark gaining, while Marcus Corp. slips.
Even if The Little Mermaid delivers, analysts still largely see the cinema industry as far from fully recovering to pre-pandemic levels. Domestic box office revenue is up 32% compared to last year in the second quarter, though still down 20% versus the same period in 2019, according to Roth MKM analyst Eric Handler.
“The industry is recovering nicely but it still has a ways to go,” he said.
(Updates share-price moves throughout and adds preview results in paragraph six.)
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