Cineplex: Weighing Post-Pandemic Earnings Volatility and Limited Valuation Upside Supports Hold Rating

Aravinda Galappatthige, an analyst from Canaccord Genuity, maintained the Hold rating on Cineplex. The associated price target was lowered to C$11.50.

Aravinda Galappatthige has given his Hold rating due to a combination of factors related to Cineplex’s recent performance and future outlook. The company’s Q4 box office results significantly missed both consensus and his prior expectations, leading to a more cautious view on near-term earnings, including lower anticipated adjusted EBITDA for the quarter. Although the film slate for 2026 appears stronger, with the return of several major franchises, he sees potential volatility in box office forecasts as investors weigh the uncertain performance of key titles that are crucial for mid-year results.

Aravinda Galappatthige’s rating is based on the view that, while Cineplex has meaningful upside drivers, there are still notable constraints on valuation. The Cinema Media segment remains well below pre-pandemic levels and its trajectory through 2026–2027 is unclear, which is important given its high-margin contribution to earnings and free cash flow. Rec Room performance has also been inconsistent, particularly on profitability, adding another layer of uncertainty. Even though leverage is improving following asset sales and could enable buybacks or a potential dividend, his estimates of normalized free cash flow just above $1 per share suggest limited upside, supporting a Hold recommendation alongside a modestly reduced target price of $11.50.