Cineplex’s 1Q Revenue Falls 85% As Most Theaters Remain Closed; Shares Drop 5%

Shares of Cineplex (CGX) fell by 5% in early trading Thursday after the company reported its first-quarter results, which mandated closures have deeply impacted as Canada faced the third wave of the COVID-19 pandemic.

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Canada’s largest movie theater chain’s revenue for 1Q 2021 came in at C$41.4 million, a decrease of 85.4% from the revenue of C$282.8 million reported in 1Q 2020. Box office revenue fell to C$3.8 million from C$111 million a year ago.

Only 415,000 people went to a Cineplex theater in the three months ended March 31, compared to 10.7 million during the same period last year.

Meanwhile, Cineplex reported a net loss of C$89.7 million (C$1.42 per diluted share) for the first three months of 2021, compared to a net loss of C$178.4 million (C$2.82 per diluted share) in 1Q 2020, when the pandemic began to impact the company’s earnings.

The movie theater chain has controlled costs as its operations have been restricted.

Cineplex’s President and CEO Ellis Jacob said, “During the first quarter, we remained prudent in managing costs and reported an average monthly cash burn of $26.9 million. Key liquidity actions included the receipt of $57 million for the completed sale-leaseback of our Head Office in Toronto and $250 million in the form of Second Lien Secured Notes – an offering that was significantly oversubscribed and a testament to the market’s faith in our business and our recovery. In addition, we obtained further relief from certain financial covenants under our Credit Facilities.”

“These strategic initiatives, combined with our ongoing focus on minimizing cash burn, provide the runway we need to see us through the pandemic recovery period. Encouraged by recent global box office results and the strong film release schedule, we are confident in our position and eager to welcome our guests back,” added Jacob. (See Cineplex stock analysis on TipRanks)

In March, National Bank analyst Adam Shine reiterated a Buy rating on CGX and raised its price target to C$17.00 from C$14.00, for a 37.7% upside potential.

Shine believes the 2022 box office will be 18% lower than 2019, rather than the 22% decline previously anticipated. He notes that other experts believe the industry could achieve the same revenues in 2022 as in 2019.

The rest of the Street is cautiously optimistic on CGX with a Moderate Buy consensus rating based on 2 Buys and 4 Holds. The average analyst price target of C$12.92 implies a 4.6% upside potential from current levels.