The selloff at Cinemark combined with the success of the latest installment in the “Avatar” franchise makes now a great time for investors to snap up the stock, according to JPMorgan. JPMorgan upgraded Cinemark from neutral to overweight and kept its $15 price target, which means more than 57% upside from where the stock currently trades. Shares rose 2.5% in premarket trading on the news. “After shares are down 31% since the beginning of December (vs. SPX -3%), we believe the risk/reward is more favorable to take a positive view on the stock,” analyst David Karnovsky wrote in a Thursday note. wrote. CNK 3M Mountain Cinemark holdings chart showing a 30% decline in December “We note that the selloff was primarily driven by the performance of Avatar: The Way of Water, which released on December 16; while the opening weekend of our Underperformed, the film has since shown strong legs and is likely to end up in the top ten highest domestic grossing films of all time,” he added. It’s all good for the box office boost movie theater chain, even in the face of a potential recession in the US. The sequel serves as another evidence point for resilient demand, especially amid a soft economy,” said Karnovsky. JPMorgan also now has more confidence in its 2023 North America box office forecast and continued improvement in film supply. The commitment and price hikes from major streamers like Amazon should help theaters grow in the long term.” Meanwhile, commentary from major studios has reached an inflection point over the past few months, from subscriber growth at all costs With a pivot away, to strategies that take advantage of more flexible distribution to maximize the value of films in theaters and DTCs. “, he said. More stability in this industry model should help Cinemark benefit and push its multiple back toward pre-pandemic levels, according to JPMorgan. Of course, there are still some risks on the horizon that could weigh on shares. These could cause near-term pressures, as seen with the recent sell-off. JPMorgan said these include the underperformance of upcoming movie releases and the risk posed by Cinemark’s high financial leverage – although the latter is expected to recover from growth. That should decline as well, and the company doesn’t have a physical debt maturity until March 2025. But that’s upside to the box office outlook, which should grow 15% year over year and continue to add more movies each year, especially from streamers and smaller and Mid-tier studios look to fill calendars.” Looking to 2024, while still early, we’re already encouraging visibility into 25 films that could gross more than $100 million, and a total Overall, expect an increase in the number of wide releases, though still below pre-pandemic levels. level,” said Karnovsky. — CNBC’s Michael Bloom contributed reporting.