What happened
Shares of theater company IMAX Corporation (IMAX 0.12%) continued its decline in May, falling 17.9% according to data provided by S&P Global Market Intelligence. And the stock may not pick up steam until it has a hit movie that drives high profitability once again.
So what
After a rough earnings report in April, movie stocks have dropped because the summer movie season is expected to be fairly weak. The U.S. box office started the year strong, with revenue up 3.1% from 2016, but the summer is expected to be relatively weak and that could mean more issues for IMAX's top line. The company counts on blockbuster movies to generate profitability and without any big hits on the horizon there's less reason to bid up the stock.
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Long-term, there should be some benefit from the upcoming Avatar movies, which really put IMAX on the map in 2009. The latest word is that four sequels will be coming starting in 2020, which is a long time for investors to wait. And investors can't be sure that this time around IMAX will be the huge beneficiary it was when the first Avatar movie was released.
Now what
There's just no catalyst for IMAX right now and the company barely posted a profit during the year's decent opening quarter. Without any sure box office hits, it'll be hard to exploit the benefits of a growing theater network. Until a big hit comes along that can excite movie goers and investors alike, IMAX is a stock that's seeing its lights dim.
