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Jerome HassCineplex IncCGX.TOPAST TOP PICKSep 15, 2015

(A Top Pick Oct 21/14.) (A Short. Down 15.36%.) Thinks this is a classical, over-owned Canadian name. It is a name that institutional managers love to own, so as a consequence it trades at 40X last year’s earnings, at about 29X this year’s. Putting it in perspective, you can go south of the border and get a name that is larger, more liquid, and trading at about two thirds of the valuation.

Jerome Hass

Owned

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$46.47

Stock price when the opinion was issued

$11.74

As of Jun 19, 2026. Market Open.

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TRADE

He loves movies. Going to be tough to top last year's Barbenheimer. Rumours of the death of movies have been exaggerated. It's going to be a season-to-season, year-to-year stock, rather than a cyclical.

WATCH

Covid hammered them, while a British company tried to buy them but aborted that deal (now in a lawsuit). It's not cheap seeing a movie, but he goes now and then. Movies are coming back, though. You can't duplicate the experience at home. Still a lot of uncertainty with this stock, though.

RISKY

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

Revenue growth is coming back a bit, with lower comparables from last year helping the year-over-year figures. Its debt levels are high, with net debt of $1.9B, and a net debt/EBITDA of 6.8X. Interest costs are $137M (last 12 months) and these will likely rise a bit with higher rates. 12-month cash flow was $116M and therein lies the problem. The debt is mostly due in the next five years. With attendance back, and a decent film slate, bankruptcy is becoming less of a concern, but it is still hard to paint a really positive picture here because of the leverage.

It is somewhat cheap (0.4X forward sales), but also has a fairly high forward P/E of 20.2X. It could become a takeover target, however, we would not place a high level of probability on that at these current levels.
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PARTIAL BUY

Allan Tong’s Discover Picks

Cineplex remains a recovery story, and its beta of 2.88 signals more risk than usual. It rose 10% in Q1, but the chart was choppy. So, consider Cineplex a partial buy. After all, Covid didn’t kill cinema-going, as some expected, but deferred it. We still love the big screen. Read Dark horses: Nuvei, Cineplex, Boralex for our full analysis.

DON'T BUY

Too many good shows on competing streaming services. Kids don't go to a movie every Friday the way he used to. Doesn't know what the catalyst is. Dividend gone. Balance sheet probably not in good shape, pandemic did lots of damage. All depends on quality of movies. Media companies all losing money. No growth tailwinds over the next 5 years.

DON'T BUY

Business increasing with post pandemic business. Hard to make as much profit with rise of streaming. Company doing well with snacks/drinks purchases in theater. Unsure of the future of the theater business.

DON'T BUY

Negative shareholders' equity of 256M. Trying to hold its level. Movie releases generate positive news, but he can't assess long-term fundamentals. Pass. Look for value elsewhere.

DON'T BUY

Tricky sector to invest in at the moment(headwinds with the emergence of streaming technology). Large global cinema operators going bankrupt. Consumers looking to reduce spending with higher interest rates and inflation. Hard time to be in this business.

PARTIAL BUY

Allan Tong’s Discover Picks With a monopoly in Canadian moviegoing, Cineplex stock has nowhere to go but up. But how far? It's no secret that Covid ravaged its operations and killed the Cineworld takeover. That case is now crawling through the courts as the UK chain appeals the C$1.23 billion in damages found against it. I doubt that Cineworld will win, but I also doubt that Cineworld will pay Cineplex the full amount. I also suffer no illusions that Cineplex will return anywhere near its past highs of $50+ back in 2017. However, it should at least return to $16 last seen in June 2021 and even surpass it. Read Looking ahead with 2 Canadian Stocks for our full analysis.

RISKY

Takeover deal fell through so they might get some sort of breakup fee. Stock's recovered somewhat. Attendance is still very weak. Very high risk play. Should benefit from the economy reopening. For gamblers.

DON'T BUY

People own this for the dividend, and pre-Covid this company was innovative with preferred seating and cafes, and programming opera and sports. But this is a difficult environment now; he doesn't see people returning to cinemas given social distancing. Also, the studios are releasing films on streaming. True, a lot of blockbusters will be released, but those films will also be released at home, too.

DON'T BUY

Has been a confounding company. With covid and all that has happened in the past year, hard to see a near future where it is profitable again. People will go back to the movies, but it will be a slow recovery. Not a huge fan of CGX.

SELL

Difficulty is that we're still in the pandemic. A lot of content has moved to streaming, so it will be hard to get people back to the theatre, plus logistical problems of health safety. The movie Black Widow will be an interesting test case.

PARTIAL BUY

Allan Tong’s Discover Picks As a stock, where does Cineplex lie? Common metrics won’t work with CGX stock. For starters, YOY comps don’t exist. Meanwhile, the Cineworld lawsuit is a cloud. In the past week, Cineplex has probably enjoyed some momentum from the AMC euphoria and has climbed about $1 to $16.15 (Monday’s close). Right before the pandemic, Cineplex was trading above $33, though well off its 2017 peak of around $53. The street has three holds and one buy at a price target of $13.13, or almost 18% downside. I disagree. I see a little more upside here. CGX stock is an unscientific gut feeling call as a cautious, partial buy. Read 3 Hot TSX Stocks for our full analysis.

DON'T BUY

It's a very difficult story. People will take time returning to the cinemas. Cineplex did a good job offering ancillary services. Also, film studios like Disney are rethinking how they will exhibit movies (i.e. streaming). Will the Marvel blockbusters return to big screens?

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Jerome HassCineplex IncCGX.TOPAST TOP PICKSep 15, 2015

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