Can exhibs sustain upward trend?

NEW YORK — Exhibitors were highly optimistic heading into this summer that it was going to be a big one. With the glut of pictures slated for release, they boasted that they were in a “no-lose situation.” Their confidence was infectious; Wall Street caught the bug and pushed up the shares of publicly traded exhibitors AMC Entertainment, Carmike Cinemas and Cineplex Odeon to lofty new heights.

As the dust begins to settle on the summer of ’93, no one seems disappointed. “We made more money in July than we made in all of 1992,” said a jubilant Michael Patrick, Carmike Cinemas president. “Our stock recently hit an all-time high, in part because of the big summer box office.”

Peter Brown of AMC sounded a similar note: “From a financial viewpoint it well exceeded our expectations; our stock price has been moving steadily upward and the big summer is definitely helping.”

But now that the summer’s over, the question is, can the upward trend sustain itself? Will Wall Street stay interested or will investors drift into other entertainment vehicles once all the shouting over the record box office becomes a distant echo?

“The investment community, like Hollywood, always looks at the last big hit,” notes industry analyst Stuart N. Brotman. “The difference this fall is that there is a genuine euphoria over the summer and there will be some carry-over. If there are a few properties that can sustain that euphoria, these stocks just might keep the pace.”

Still, Wall Street remains circumspect. Some say that even if the stocks aren’t headed for a fall, the tremendous growth of the last six months — AMC up more than 80%, Carmike up more than 20% and Cineplex Odeon up 90% — will be next to impossible to maintain.

“There’s not any inherent growth in the business; it remains almost totally product-driven,” said money manager Gordon Crawford of Capital Guardian. He pointed out that this summer’s big numbers could cause problems for the exhibs’ stocks because of unfavorable earnings comparisons if next summer can’t live up to this one. “When you have peak product in the market, it’s not the time to be owning these stocks,” he said.

Stock analyst Lisbeth Barron of S.G. Warburg said public market investors need steadier, longer-term growth prospects than the exhibition stocks provide, and believes the stocks will continue to attract mostly shorter-term investors who are willing to play the box office.

But operators argue that the summer of ’93 was more than just a blip and that the business is looking up for the foreseeable future. And despite the big run-ups in price over the last six months, operators say their shares will climb still further.

Cineplex Odeon VP of marketing and communication Howard Lichtman said “Jurassic Park” brought back to the theaters a lot of people who had gotten out of the moviegoing habit. More important, late summer films like “The Fugitive” kept them coming back for more.

“This industry is cyclical,”Lichtman said. “Traditionally … when you’re in an up cycle it generally lasts for a couple of years. As long as the product is there, this summer should represent the beginning of an up cycle.”

Likewise, Carmike’s Patrick believes the studio’s beefed-up production schedules bode well for exhibitors. “Even if they (the studios) changed their minds right now, there’s so much currently in production, we’re already in good shape for the next few years.”

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