Cineplex Inc (TSX:CGX) had a tough 2017, and the stock isn’t off to a much better start in 2018. Last year, the stock dropped more than 27% in value, summer attendance wasn’t strong and it even had to discount tickets in what is normally supposed to be its peak summer season.
Year-to-date, the stock is already down more than 14% to start the year. However, without a clear reason behind the big sell-off, it might be an opportunity for investors to buy at a low. The dividend stock now yields more than 5.2% as a result of the lower price.
Although investors may be bearish on the company, consider that despite the struggles Cineplex had in the summer, its sales were down just $5 million from the previous year, for a decline of just over 1%. The company has also been able to stay profitable as well, and in three of the past four quarters its profit margin has been a very respectable 5% of sales.
While Cineplex’s business model as it is today might not have a long-term future, the company is making strides to reinvent itself by offering a Rec Room for a more diversified experience for its customers. Investors can look to the success that BlackBerry Ltd (TSX:BB) (NYSE:BB) has had in shifting its focus from handheld devices to being a software and service provider as proof that a company can change its model and still be successful.
It’s still too early to tell how Cineplex will fare as it continues to transform, but one thing that’s clear so far: although it may be down, it’s far from being out.
