Hedge fund billionaire buys Cinemark stock, an AMC competitor

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on May 16, 2024
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  • Dan Loeb, a hedge fund billionaire, has bought Cinemark stock.
  • The company hopes to benefit from the upcoming movie releases.
  • Its stock has formed an inverse head and shoulders on the weekly chart.

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Cinemark (NYSE: CNK) stock price will be in the spotlight after Dan Loeb, a well-known hedge fund billionaire bought a stake recently. This purchase could lead to more gains since the stock has jumped by over 126% from its lowest point in December.

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Dan Loeb invests in Cinemark

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Hedge funds are publishing their 13F reports with the SEC this week. In its report, ThirdPoint noted that it acquired shares in Cinemark in the first quarter. It also initiated positions in Alphabet, Marvell Technology, and Advance Auto Parts. 

Daniel Loeb is a big player in the hedge fund industry and is one of the most respected activist investors in the sector. ThirdPoint manages over $16 billion while Loeb’s net worth has jumped to over $3 billion. 

Therefore, Loeb’s investment in Cinemark, an AMC competitor, is a sign that he is optimistic about the company and the industry. 

This investment came at a time when the movie theatre industry is going through major challenges after last year’s strikes in Hollywood. 

In its recent results, AMC said that its revenues dropped by 0.3% in Q1 to $951 million and warned that Q2 will be soft as well. Similarly, Cinemark’s revenue fell from $611 million in Q1’23 to $579 million while its adjusted EBITDA margin narrowed to 12.2%. 

Analysts believe that Cinemark has room to grow its market share, revenue, and profits this year. In a recent note, a Wells Fargo analyst boosted his target for the Cinemark stock to $23, a big increase from the current $18.7.

The other catalyst for the stock is that there are some popular movies scheduled for the next few years. The most notable ones are Avatar 3, Moana, Superman Legacy, Gladiator, Despicable Me, and Mufasa.

Additionally, unlike AMC Entertainment, Cinemark has a better balance sheet. It exited the last quarter with over $788 million in cash and equivalents, $2.3 billion in long-term debt and $840 million in lease obligations. It can manage its debt maturities well without raising cash.

Cinemark stock price analysis

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CNM chart by TradingView

Cinemark shares have another catalyst: technicals. On the weekly chart, we see that the stock has formed an inverse head and shoulders pattern, a popular bullish sign. It is now sitting near its neckline at $19.92, which is a positive sign.

Cinemark has also crossed the 200-week moving average, meaning it could form a golden cross pattern soon. It is also hovering at the 38.2% Fibonacci Retracement level. Therefore, the outlook for the stock is bullish, with the next target to watch being at $23.65, its 50% retracement point.

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