Short sellers increased their positions against Cinemark Holdings Inc. in February as the cinema chain reported a wider-than-expected loss for the fourth quarter of 2023 and amid concerns about the box office recovery in 2024. The movie theater operator ended February as the most-shorted communication services stock traded on major US exchanges with 22.42% short interest, up from 21.72% at the end of January.
In February, Cinemark reported an attributable net loss of $18.0 million, or 15 cents per share, for the fourth quarter of 2023, narrower than the year-ago net loss of $99.3 million, or 82 cents per share. The fourth-quarter 2023 S&P Capital IQ consensus estimate for GAAP EPS was a loss of 8 cents per share. Cinemark’s revenue increased 6.5% year over year in the fourth quarter to $638.9 million, exceeding the consensus estimate of $617.2 million.
S&P Global Ratings upgraded Cinemark’s issuer credit rating to BB- from B+ in late January, citing the company’s improved leverage. Ratings analysts expect a “material disruption” in the theatrical release schedule for 2024 due to production delays resulting from the Hollywood strikes in 2023. They project a 10% decline in domestic box office revenue in 2024 and cite macroeconomic risks that could limit theatrical revenue growth this year.
Looking at other stocks, Sphere Entertainment Co. was the second-most-shorted communication services stock in February with 21.43% short interest. Sphere swung to an attributable net loss of $173.2 million, or $4.91 per share, in the fiscal quarter ended Dec. 31, 2023, from a year-ago attributable net income of $67.6 million, or $1.95 per share. CFRA analysts rated Sphere as a “strong sell” in a March 23 research note, citing concerns over its valuation and growth prospects.
Sports-first live TV streaming platform fuboTV Inc. was the third-most-shorted communication services stock in February, with 20.10% short interest. The company filed an antitrust lawsuit against Walt Disney Co., Fox Corp. and Warner Bros. Discovery Inc. and their affiliates in February to block their planned joint venture for a sports streaming platform.
Overall, short interest in the communication services sector increased to 3.46% at the end of February from 3.28% at the end of January. Cable and satellite companies were the most-shorted communications stocks in February, with 5.40% short interest, followed by alternative carriers with 5.03%. Interactive home entertainment stocks were the least-shorted during the month.