Movie theatres outlook for 2025

Macquarie Equity Research released a report this week on players in the movie theatres space.Presenting an optimistic outlook the firm notes that the volume of content has already reach pre-pandemic levels, and a double digit year-on-year (YoY) growth in the domestic box office can be expected in 2025.The firm expects companies to post top-line growth of 11-18% in 2025E and 7-10% in 3-year CAGR terms. The report noted this implies that with healthy operating leverage, this can translate to EBITDA growth of 12-106%+ in 2025E and 5-46%+ 3year CAGR.Cinemark Holdings Inc (NYSE:CNK) and IMAX Corp (NYSE:IMAX) are the firm’s top picks, with analysts noting they rose 120% and 70% respectively, although 2022 and 2023 were periods of underperformance for the sector.The setup for 2025E is positive as industry stakeholders are projecting an increase in wide-release films. Box office revenues in 4Q24 were $2.3bn, representing growth of +26% YoY at -19% compared to 2019, in line with the firm’s expectations.There was strong performance from multiple blockbusters on the heels of a quarter impacted by Hollywood strikes. In 4Q, two films, Wicked and Moana 2, generated over $400m domestically while seven films generated over $100m. 2024 domestic box office revenues came to $8.6bn, -4% YoY and -25% vs 2019, observed the report.The embedded backlog growth, 2025 global box office outlook, improving margins and FCF, increased local language films (less reliance on Hollywood), and a strong balance sheet make IMAX the firm’s top pick.Furthermore, the report noted, “Following our estimate revisions, shares now trade at ~10x our 2026E EBITDA and ~18x our 2026E EPS, whereas shares traded at 13x EBITDA from 2012 to 2017. Further, we believe given its operating leverage, global brand, and technology boat, IMAX shares can trade easily above 20x on a P/E basis. We raise our target price on IMAX by 4% to $28, from $27.” CNK’s performance as a top exhibitor with a clean balance sheet, superior margins, better theatre locations (lower rent), and a top-notch management team makes it a top pick.“CNK's domestic market share of 14% is up 85bps YoY, well above the pre-pandemic range of 12-13%. We expect CNK EBITDA to grow 25% in 2025E, while shares now trade at 7.6x our 2026E EV/EBITDA and 12.5x P/E,” the report said.Even though performance was strong in 2024, the company can achieve overperformance from capital allocation announcements, box office upside, and margin improvement, the report said.