While bankruptcy conjures images of failure, for certain enterprises, it may be an opportunity to refocus and streamline operations. That may be the case for National CineMedia (US:NCMI), which this week filed for bankruptcy.
Billed as the largest cinema advertising network in the U.S., National CineMedia understandably fell under hard times due to the COVID-19 disruption. However, following the filing, NCMI stock bounced dramatically higher.
According to the advertising specialist’s Form 10-K filed with the U.S. Securities and Exchange Commission (SEC), National CineMedia requested on April 11 a voluntary petition for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of Texas, In re: National CineMedia, LLC, Case No. 23-90291.
The move comes days after bankrupt theater operator Cineworld (UK:CINE) submitted its reorganization plan to the same Texas court. In a filing to the London Stock Exchange, the Regal Cinemas owner reiterated that it expects to emerge from Chapter 11 during the first half of 2023.
Despite the negative perceptions for NCMI stock, Wall Street saw a contrarian opportunity, conspicuously bidding up shares. In the trailing five sessions ended April 13, NCMI gained a remarkable 217.43%. What’s more, on a year-to-date basis, National CineMedia finds itself up over parity to the tune of 71.16%.
Unusual Options
Notably, NCMI stock became a subject of Fintel’s screener for unusual stock options volume. Specifically, call volume hit 6,437 contracts against an open interest reading of 1,931. On average, call volume reaches 87 contracts. On the other end, put volume came out to only 767 contracts against open interest of 157. Typically, put volume reaches 6 contracts.
Moreover, options traders and retail investors don’t stand alone in their bullishness toward NCMI stock and the underlying bankruptcy news. Specifically, investment research firm Wedbush reiterated coverage of National CineMedia with an ‘outperform’ recommendation.
“Despite a difficult advertising environment and a still-recovering box office, NCM is well-positioned within the ad delivery ecosystem, as theatrical attendance is beginning to meaningfully rebound,” said Wedbush analyst Alicia Reese, as reported by Reuters.
“Ultimately shares will rise as the company refocuses post-restructuring.”
Plus, Fintel’s consensus one-year price target for National CineMedia is $3.57 per share. The forecasts range from a low of $3.54 to a high of $3.68. The consensus represents an increase of 730% from its latest reported closing price of $0.43 per share.
Prospective Investors
Meanwhile, AMC Entertainment Holdings Inc. (US:AMC) appears to have renewed interest in National CineMedia. According to AMC’s 13-G filing on April 10, it owns 16.6 million shares of NCMI stock. With that purchase, Reddit r/WallStreetBets meme-stock favorite AMC stock becomes the second-biggest holder of the cinema ad firm, after Cinemark Holdings Inc. (US:CNK), which owns slightly more than 48.5 million shares.
Possibly adding to enthusiasm for NCMI stock is the box office’s general resilience to economic pressures. While no sector is perfectly immune from recessionary dynamics, Hollywood historically provided a means of cheap escapism. And while movie studios suffered during the Great Recession, certain content categories that offered escapism fared well.
More than 83 million unique moviegoers have returned to theaters in 2023, and this last weekend’s release of “The Super Mario Bros. Movie” was the largest opening weekend debut of the year with $204.6 million at the box office, NCM said in its press release.
Nevertheless, prospective investors must be aware of the high risks associated with NCMI stock. In the trailing one-year period, shares stumbled 82.53%. Unsurprisingly, bearish traders also target National CineMedia for cynical reasons. Per Fintel, NCMI incurs short interest of 11.24% of its float. Also, its off-exchange short volume ratio hit 52.85%.
This article originally appeared on Fintel
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