Such is the case for Cineplex Inc. (TSX:CGX), the Canadian company holding an effective monopoly over the cinema industry in the great white north.
The company owns and operates cinemas from coast to coast, having grown from a regional chain to capturing 78% of the movie date night industry across Canada, a fact which has been priced into the company’s traditionally high valuation multiple.
Given the company’s near-30% drop year to date, some analysts have pointed to Cineplex as a potential value play for investors expecting a rebound in the industry.
After all, the slate of movies this past summer was one of the worst in recent decades, and as movies come and go, anticipating growth for the company’s fourth quarter may not be such a novel idea, given the slate of movies set to come out next month including the new Star Wars blockbuster.
That said, it is important to keep in mind that the entertainment industry is in a period of flux right now, with traditional cinemas doing everything they can to fend off the cord-cutting, cinema-closing threat which is Netflix, Inc. (NASDAQ:NFLX) and its compatriots in the streaming business. With structural changes on the horizon, I would recommend investors stay away from this sector, period.Invest Wisely, my friends.