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Macquarie Group Senior Analyst Chad Beynon joins Yahoo Finance Live to discuss the outlook for AMC and IMAX as summer blockbusters like ‘Top Gun: Maverick’ hit the big screen.
- "Top Gun: Maverick" hauled in an impressive $156 million over the Memorial Day weekend, and that is putting upward pressure on shares of AMC and Paramount. Let's talk about the state of the movie industry with Macquarie analyst, Chad Beynon. Yahoo Finance's Allie Canale is here as well.
Chad, always good to see you. And I'm going to channel my inner Maverick here. I'm going to put on my glasses as I ask this serious question. Now you have an underperform rating on AMC, $6 price target. Does the release of "Top Gun" make you more optimistic on AMC stock?
CHAD BEYNON: Thanks for having me, love the look. At this point, it doesn't really change our view. May will come in about 30% below total Box Office versus what we saw pre-pandemic. This is kind of what we were seeing in the fourth quarter before Omicron started to set in and hurt those January, February results. Obviously, we have a couple more big releases over the next couple of weeks.
If we start to see the blockbusters deliver like "Top Gun," like "Maverick" here, and then most importantly, if we see some of the mid-tier movies start to kind of bring back those other audiences, I would probably have to reconsider my estimates. But at this point, we're sticking with our forecast for 22 and 23 and our $6 price target on AMC.
We do have outperforms on Cinemark and IMAX. I prefer IMAX a little bit more, just kind of given where the stock is trading.
- To what extent do you believe that the theater operators can actually deploy some of that pricing flexibility that we've seen for some blockbusters most recently?
CHAD BEYNON: So pricing versus pre-pandemic is up anywhere between 15% and 25%. Some of that is mixed, some of that is this price optimization as you talked about. We were actually just looking at pricing for "Maverick" this week in New York and it's roughly $1 to $2 more than other movies. And we're talking about a $17 to $18 ATP, average ticket price, versus something about $1 or $2 below that. So I think during the big weekend release in the subsequent days afterwards, we'll start to see this strong pricing.
Also, there's not as many matinee movies. That's usually where you see some of the discounts. You see that during matinees, senior citizen pricing, and also on Tuesday, and we're really not seeing people come back during those times. But the pricing is certainly helping, and the concession pricing is very strong as well. We're seeing the incidence of concession purchases, an almost all-time record levels. We're seeing 30% to 40% increases on concessions versus pre-pandemic.
- And Chad, Paramount said that more than 55% of "Maverick's" audience this past weekend was over the age of 35. We know that that older demographic has struggled to come back. You mentioned how you're a bit more bullish on IMAX. What will it take for theater chains to continue to entice that older generation to return to the big screen as opposed to streaming? Is it more of those bigger screens, that more overall 4D type of experience?
CHAD BEYNON: I think it is. I think the marketing side of it has been really difficult. Movie watching begets more movie watching. When you're viewing "Maverick," you see the trailers and you see really this really strong logjam of blockbusters that are going to be released over the next 3/4, I think that also kind of helps in the consumer standpoint.
For IMAX, they really just need these big blockbusters. They have anywhere between 40 and 50 movies per year. They run the showing for about a week and then they kind of move on to the next one. This will probably be on IMAX screen for two weeks and then you have "Jurassic World" and then "Lightyear."
For some of the other ones, like, the traditional exhibitors, they really do have to rely a little bit more on some of these mid-tier movies that just haven't landed well. Since the pandemic, I think a lot of those have gone towards streaming. But it is nice to see something outside of a DC Marvel this strongly. Again, I think generation X and above went out to see this movie, and I think we're going to continue to see that throughout the summer.
- Chad, I want to go back to when you mentioned on the matinee. In this inflationary environment, movie theaters killing off the matinee, Granny Sars needs her $5 movie. She needs it.
CHAD BEYNON: Fair point. Some of these chains have implemented some type of subscription plans that probably help for a client like that. AMC has the Stubs, an A-list program where you can watch multiple movies a month at a set price. Cinemark also has a very strong subscription plan as well.
The matinee showings are reduced. I think that's helped with operational expenses as well. This is an industry with very high operating leverage both ways, on the way up and the way down. And as we saw during the past 8/4, these companies burned a lot of cash. So when we came out of that, they said, "How can we run the theater better?"
And I think one of the things they looked at was early showing times, kind of eliminating that, starting a little bit later, or just reducing the amount of screens, the amount of product that was out there. So that's something that could be changed. I don't think we're going to have enough product for that type of client going forward.