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In this week’s newsletter:
- With the box office on a fantastic run this year, I talk with Wall Street analysts to see who stands to benefit the most.
- Venture capital activity in media slowed in September, according to Pitchbook.
- Lionsgate has a new suitor.
- And the Netflix chill (of a different kind) continues on Wall Street.
Thanks for reading.
THE DEEP DIVE
The Box Office Is on a Run. Who Benefits the Most?
Smash hits “Spider-Man: Brand New Day,” “The Odyssey,” “Toy Story 5,” and “Obsession“ powered box office receipts to over $8 billion, up 20% from a year ago, according to Drew Crum, analyst at B. Riley Securities.
The bonanza has been boffo for exhibitors. The theater-related stocks Crum covers are up nearly 70% so far this year, and last week’s $84 million in ticket sales is “another positive data point for the industry,” he said.
What will the sequel look like? Crum says he expects third-quarter earnings, which will be out in the coming weeks, to be “outstanding” and that the slate for the holiday season appears promising.
- Exhibitor stocks are up nearly 70% so far this year.
- MoffettNathanson sees box-office receipts reaching $10.5 billion, off just 8% from the pre-COVID level in 2019.
- Analyst Drew Crum raised his target price for Imax to $64 a share.
- Robert Fishman of MoffettNathanson pushed his target for Cinemark to $41 a share.
Looking ahead to 2027, Crum warns it will be tough for the box office totals to top the 2026 performance. “We see limited upside and thus remain selective, with Imax as our only buy-rated name.”
Crum raised his target price for Imax to $64 from $61, and forecasts third-quarter revenue to come in at $170 million, up from his earlier estimate of $146 million, and adjusted earnings before interest, taxes, depreciation and amortization to be $95 million, compared to $73 million previously.
He sees that trend continuing with fourth-quarter revenue of $132 million, up 6% from a year ago with the release of “Dune: Part Three” being a major catalyst.
For 2027, Crum has raised his revenue forecast to $508 million from $486 million and now sees adjusted Ebitda of $248 million, up from $236 million. In his initial estimates for 2028, Crum sees Imax revenue hitting $537 million with adjusted Ebitda of $268 million.
Imax was open to a possible sale in the first half of the year, talking to potential buyers. But by May, the company hadn’t hired bankers or received any formal offers. A possible acquisition is not mentioned in Crum’s analysis. Potential buyers include the big studios, tech companies in the streaming business and private equity.
Robert Fishman, analyst at MoffettNathanson, is also upbeat about the movies. “Altogether, we remain optimistic that the box office can sustain its momentum after 2026’s blockbuster year,” he said.
Fishman sees the fourth-quarter domestic box office hitting $2.4 billion, up 8% from a year ago, bringing the full-year total to $10.1 billion, based on first-day trailer views for upcoming movies.
Fishman expects 2027 ticket sales to match 2026’s strong results, raising his forecast to $10.1 billion from $9.9 billion. Key upcoming films include “Avengers: Secret Wars,” “Spider-Man: Beyond the Spider-Verse,” “Man of Tomorrow,” “Frozen III” and the sequel to “A Minecraft Movie.”
He’s also encouraged by the slate the studios have announced so far for 2028 with five films in the superhero category, including nine kids/family movies. He expects the 2028 box office to hit $10.5 billion, down just 8% from the 2019 pre-COVID level.
“We believe the structural health of the box office has course-corrected after a rocky post-COVID environment, driven by a reversal of pandemic-era exclusivity windows, a rebound in output from the major studios and a shift to premium large formats, which is improving both attendance and consumers’ willingness to pay for the theatrical experience,” he said.
Among the theater owners, Fishman rates Cinemark as a buy, and increased his price target for the stock by $1 to $41 a share.
Fishman also raised his estimates for Cinemark’s 2026 revenue to $3.63 billion from his earlier forecast of $3.55 billion, and adjusted Ebitda to $805.8 million from $776.8 million.
“While the 2027 slate is roughly equivalent to 2026’s on paper, we believe a more balanced release cadence will serve as a tailwind versus the more concentrated 2026 calendar, and the mix of films will be more favorable for Cinemark specifically,” he said. “In addition, the 2028 slate looks strong based on what’s been announced, and we believe 2028 has the potential to be another inflection year for the box office.”
DEAL SHEET
- Apollo Global Management-backed Legendary made a new offer to buy Lionsgate, according to Bloomberg. Terms of the offer were not disclosed. Legendary expressed interest in Lionsgate this summer after Lionsgate spun off Starz Entertainment. Banijay Group and Bollore Group were also reportedly interested in Lionsgate, which declined to comment.
- Ad agency holding company Publicis Group’s proposed $2.5 billion acquisition of data company LiveRamp was approved by the Federal Trade Commission, subject to certain conditions. Those conditions include allowing non-discriminatory access to LiveRamp products and setting up firewalls to prevent Publicis from accessing LiveRamp’s customer data.
- 32 Equity, an investment vehicle started by the National Football League, and private equity firm General Atlantic plan a fund that will invest in sports-related companies. 32 Equity was launched in 2013, with each of the league’s 32 owners contributing $1 million. Working with General Atlantic will enable 32 Equity to make larger investments.
FUNDING FILE
Venture capital deal activity in the U.S. media category slowed in September to $58.3 million from $75.9 million in August, according to data from PitchBook.
There were 14 deals reported in September, compared to 12 the month before.
A year ago, 20 deals worth $88.1 million were announced.
The biggest deal saw Sports Illustrated Tickets, an online ticketing marketplace, raising $40 million from Feenix Venture Partners.
In the U.S. entertainment software, publishing and media and information category, 44 deals worth $266.4 million were reported by PitchBook in September, up from 35 deals worth $163.6 million in August.
A year ago, there were 37 deals worth $92.2 million reported.
The biggest deal was NEX, an entertainment software company, raising $150 million from a group led by BAI Capital, with Baillie Gifford, Logitech International, Medici Capital Partners, NBA Equity and Raines Group participating.
FINANCIAL ROUNDUP
Netflix Chill on Wall Street
After a third-quarter earnings report that confirmed that Netflix revenue growth is slowing, shares dropped and several analysts lowered their target prices for the streamer — and most rated the stock a buy at current levels — even if there remain some defenders.
“We are more confident than the market is that … Netflix is still a high-quality asset and a global leader in video streaming, supported by unmatched scale, a proven and increasingly localized content production engine, and a differentiated product strategy,” said Mark Mahaney of Evercore ISI, who cut his target price for Netflix to $90 a share from $110.
USB analyst John Hodulik cut his target to $110 from $115, David Joyce of Seaport Research reduced his target to $90 from $102, and Guggenheim’s Michael Morris lowered his target to $78 from $80. All those analysts rated the stock as a buy.
Kannan Venkateshwar of Barclays dropped his target price to $65 from $70 based after cutting the earnings multiple on the stock from 19 times adjusted earnings per share from 17 times. And Robert Fishman of Moffett Nathanson lowered his price target by $10 to $90.
“After the sell-off, we believe Netflix’s downside is limited and the stock presents an attractive entry point to capture upside in leveraging the company’s global scale to drive incremental growth above the strength of its core business model,” Fishman said.
Comcast to Take $1 Billion Charge
Comcast said it plans to take a $1 billion-plus charge against earnings next quarter in an attempt to get ahead of costs associated with the separation of Comcast’s cable and NBCUniversal and Sky media units. Much of the charges relate to the challenging broadband business, and layoffs are expected.
Co-CEO Michael Cavanagh said that Comcast was on track to complete the transaction by the middle of next year. He said the company was “well into the execution phase,” hiring executives to staff two separate public companies.
For the third quarter, revenue and net income were lower compared to a year ago, but ahead of analyst forecasts, which boosted Comcast’s stock in Thursday trading.
Continued losses of broadband and cable subscribers were offset by gains at NBCUniversal. Streaming service Peacock had its second-consecutive profitable quarter. It had 48 million subscribers, unchanged from the second quarter, but benefits from a price increase and higher advertising revenues. The company said The World Cup generated $664 million in ad revenues, including $224 million in the third quarter.
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