Personal Finance

Why IMAX Corporation's Shares Plunged 18% in May

People watching a movie in a theater.

What happened

Shares of theater company IMAX Corporation (NYSE: IMAX) 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.

People watching a movie in a theater.

Image source: Getty Images.

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.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of and recommends IMAX. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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