Cineplex Inc. (TSX:CGX) stock has plunged 27.7% month-over-month as of close on November 20. Shares are now down 30% in 2018 so far. The most recent dip occurred after the release of its third-quarter results.
Net income at Cineplex dropped 40.7% year-over-year to $10.2 million in the third quarter. Adjusted EBITDA fell 9.3% to $53.4 million. Theatre attendance rose 2.6% from the prior year which boosted revenues and box office and concession sales. However, this was not enough to overcome the negatives in Q3.
Cineplex saw media revenue drop 16% to $33.5 million largely due to a decline in cinema advertising revenue, which the company attributed to the "cyclical nature" of the business and the "timing of campaigns".
Earnings were also negatively impacted by Cineplex operating fewer screens in the quarter. This is a very disappointing report considering the broader bounce back in the cinema industry so far in 2018.
Cineplex stock has now plunged into oversold territory and boasts a Relative Strength Index (RSI) of 21 as of close on November 20. This should interest investors on the hunt for short-term bargains but looking long Cineplex will have to contend with some big challenges.
This was a good year for the cinema, but the rise of even more streaming services in 2019 will put a further strain on the old media.
Cineplex will need to find ways to make up more ground in its amusement revenue in order to combat these worrying trends.
