Hollywood may be back thanks to strong box office debuts for "A Quiet Place Part II" and "Cruella" over Memorial Day weekend. And shares of AMC (AMC) continue to go bonkers after the company announced a new series of perks (such as free popcorn) for the retail investors in the Reddit WSB army that have helped push the stock to a new all-time high.
But Goldman Sachs analyst Michael Ng isn't as excited about the cinematic comeback. Ng downgraded shares of AMC rivals Cinemark (CNK) and big screen theater operator IMAX (IMAX) to a rare "sell" rating Wednesday. Ng does not cover AMC.
"Although we expect a sharp domestic box office recovery in 2021 and 2022, we believe that this is reflected in current valuations," Ng wrote in his report. Shares of Cinemark and IMAX fell 4% and 5% respectively. But AMC kept meme-ing on, surging another 25%.
But Ng noted that even if the movie theater business bounces back to meet current expectations of about $8.2 billion in domestic box office receipts in 2022, that is still a sharp pullback from the pre-pandemic levels of $11.4 billion in 2019.
And Ng thinks investors are ignoring the fact that "the pandemic has further popularized streaming." Thanks to Netflix (NFLX) and Disney+ (DIS), it may be tougher to convince moviegoers to go to the theaters as much as they used to unless it's to see major blockbusters.