The Multiplex Isn't Dead; 3 Stocks Laughing All the Way to the Bank

You're probably convinced that movie theaters are toast. It's too easy -- and comfortable -- to watch movies from home, if you can wait. Digital release windows have also narrowed on this end of the pandemic crisis. Even some analysts who follow the industry have braced for the worst, figuring that after decades of rolling credits, the multiplex will be the next industry to fade to black.

Not so fast. Have you seen how box office receipts are holding up, nearly a third of the way into this year? After a slow January -- when the biggest theatrical release that month failed to crack $65 million in domestic ticket sales -- folks are flocking back to their local movie house.

Image source: Getty Images.

This past weekend, Project Hail Mary topped $80 million in U.S. box office receipts. That is more in its first three days than any January release cleared in its entire theatrical run. Earlier this month, Hoppers had the strongest opening weekend for an original animated property since 2017.

Domestic exhibitors have sold $1.56 billion in tickets year to date, 20% ahead of where the industry was last year. You have to go back more than six years -- pre-pandemic times -- to find the last time theater chains raked in the kind of money at the box office that they are right now.

There are several ways to cash in on the trend that no one saw coming. I narrowed down my list to three, and AMC Entertainment (NYSE: AMC) didn't make the cut. Looking at three entirely different parts of the business, I narrowed my list of the best stocks to play this unexpected renaissance. Rival chain Cinemark (NYSE: CNK), theatrical experience supersizer Imax (NYSE: IMAX), and multiplex landlord EPR Properties (NYSE: EPR) are three stocks I think are best suited to benefit from this industry plot twist that no one saw coming. And now, your three feature presentations.

1. Cinemark

Before digging into Cinemark, I owe it to the many AMC stock investors to explain why the country's leading movie theater operator lost out to a smaller competitor. AMC has done a few things right, getting folks to spend more for a night at the movies. It introduced reserved seating. AMC led the way in sprucing up its concessions, driving up what patrons are paying once inside to enhance the experience.

Unfortunately, AMC hasn't served its shareholders well by perpetually diluting the outstanding stock count. Its diluted shares have risen 34% over the past year, and that was actually a quiet year for its printing press. Its latest quarter was another disappointment. It managed to keep its year-over-year revenue decline to 1% despite experiencing a 10% slide in attendance, but its adjusted net loss widened by 27%. Free cash flow plummeted 71%.

AMC investors have suffered annual declines of 85%, 85%, 35%, and 61% since 2022, respectively. The stock is down another 35% barely into 2026. The shares have crashed 99.8% from their all-time high in the summer of 2021.

Cinemark is much smaller but also smarter in its operations. It's been consistently profitable for three years. In the same last five years that have seen AMC's diluted share count rise nearly 18 times -- not 18%, 17.8 times the number of shares it had at the end of 2020 -- Cinemark's outstanding share count has risen a more reasonable 15%. Cinemark pays a dividend and trades for just 13 times forward earnings. You probably know how that compares to AMC.

2. Imax

There are a few reasons to make Imax a top play in the secret turnaround that few believe is actually happening. Like Cinemark, Imax has been consistently profitable in each of the last three years. Its share count has actually declined since the COVID-19 crisis.

The $410 million in revenue it generated last year is an all-time high. Imax has an advantage in its business model. It helps multiplex operators deliver a premium viewing experience with supersized visuals and audio. Directors of big-budget films often shoot footage optimized for the Imax experience, making it distinct from other premium platforms. It's in a good spot. Folks are fine waiting for comedies, indie films, and romcoms to make their way to the home market. It's a different story for the superhero and action films that draw viewers of all ages to the local multiplex. The slate of Imax supersized films coming out in the next few years is promising.

3. EPR Properties

Income investors seeking to generate healthy payouts from the strengthening movie theater industry may consider EPR Properties. The REIT specializes in experiential properties, owning "eat and play" venues and amusement parks, but mostly multiplexes that it leases to other operators.

EPR has a current yield just above 7%, higher than the safer residential and commercial property REITs. It boosted its payout just last month. It's been trying to diversify from film houses, but if the revival continues, it can probably take its time as investors pass the popcorn.

Rick Munarriz has positions in EPR Properties. The Motley Fool has positions in and recommends EPR Properties. The Motley Fool has a disclosure policy.