Janney Montgomery Scott Upgrades Entertainment & Digital Media Stocks RGC & CNK

October 22, 2009 8:35 AM EDT

Janney Montgomery Scott upgrades Entertainment & Digital Media stocks Regal Entertainment Group (NYSE: RGC) and Cinemark Holdings (NYSE: CNK) to Buy

Janney analyst says, "We are raising both RGC and CNK to a BUY, as we see both companies benefiting from 1) a strong 4Q09 box office, 2) the culmination of DCIP financing, and 3) improvements in foreign exchange (benefits only CNK), and 4) a potentially decent 2011 film slate. Our new fair value estimates stand at $14 for RGC and $13.50 for CNK."

"We look for RGC to report 3Q09 EPS of $0.11 and for CNK to earn $0.17 driven by weaker attendance levels and continued earnings pressure from higher film rental costs...Strong Start to 4Q The 4Q box office is already up about 12% YOY quarter to date. Our updated quantitative model now projects 13.7%growth in 4Q09 or 8.6% for all of 2009. Key blockbuster hits include The Twilight Saga: New Moon, A Christmas Carol, Michael Jackson: This is It, and Avatar (3-D)... Buy Ahead of Catalysts With 4Q looking quite promising, DCIP financing reportedly on track again (with the possibility of closing next month), and Forex comps that are likely to give CNK a solid boost, we recommend investors build positions in the exhibitors based on our belief that 3Q earnings weakness will give way to multiple expansion as investors revisit the names and find near-term growth potential and longer term secular drivers."

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