Cineplex Needs an Assist From Disney in 2019

Cineplex (TSX:CGX) stock has dropped 1.4% in 2019 as of early afternoon trading on March 5. Shares are down 23% from the prior year.

Box office results in the first two months of 2019 have been disappointing. So-called Oscar season failed to generate a bump for cinemas across North America. New releases in 2019 have only generated $616 million in box office revenues as of late February, not including holdovers from late 2018.

Cineplex will be relying on Disney (NYSE:DIS) properties for a boost in the spring and summer seasons. The next big release is Captain Marvel, which debuts this week. Whether Captain Marvel will meet the lofty expectations that have been set before it remains to be seen. If it disappoints, the rest of the March slate is underwhelming. This could mean the industry will enter the final three quarters with a lot of ground to make up.

There is a slew of big movies set for spring release, including Avengers: Endgame, the sequel to Avengers: Infinity War which drew in over $2 billion worldwide. The remainder of 2019 should bring in some improved revenues for Cineplex, but investors should expect depressed results in the first quarter.

Cineplex last had an RSI of 36, which puts it just outside of oversold territory. The TSX is broadly overpriced in early March. Investors should await Q1 2019 results from Cineplex before jumping in, as a broader pullback will likely result in more favourable pricing. Cineplex does still offer an attractive 6.9% dividend yield.