The actors strike rattling Hollywood could spell trouble for shares of Cinemark Holdings in the near term, according to JPMorgan. Analyst David Karnovsky downgraded the movie theater chain to neutral from an overweight rating, viewing the strike as a near-term impediment for shares limiting box office visibility. “The ultimate impact to theaters will be a function of the length of the strike, though our early sense is that fundamental differences remain between the unions and [the Alliance of Motion Picture and Television Producers],” he wrote. “Absent a resolution, we expect the strike will remain an overhang to CNK shares and limit upside.” Hollywood actors headed to the picket lines last week after hitting a roadblock in negotiations on issues such as wages, residuals and artificial intelligence use. The move shuttered production on a slate of high-profile movies slated for next year and means actors are no longer promoting upcoming films. It marks the first tandem strike with film and television writers in more than six decades. CNK YTD mountain Share performance in 2023 “While we think the industry has demonstrated an ability to run at ~$8.5-9.0b of gross revenue, we estimate further improvement will require more wide releases,” Karnovsky wrote. “Visibility into this, however, is now limited by the SAG-AFTRA strike, which has already shut down production for several films slated for 2H’24.” Shares of Cinemark have surged nearly 78% in 2023. Given the near-term headwinds, JPMorgan adjusted its price target to $18 from $21 a share, reflecting 17% upside from Tuesday’s close. Shares fell nearly 4% before the bell. — CNBC’s Michael Bloom contributed reporting
