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UPDATE: IMAX's stock drops as 'Star Wars' hype fades

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starbuxsux   Tuesday, 12/22/15 09:46:26 AM
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UPDATE: IMAX's stock drops as 'Star Wars' hype fades

4:09 PM ET 12/21/15 | MarketWatch

By Tomi Kilgore, MarketWatch

IMAX's stock may be following the Wall Street adage 'buy the rumor, sell the news'

Shares of IMAX Corp. stock dropped Monday, as did other "Star Wars" theater stocks, as the movie's record box-office take plus upbeat analyst comments failed to generate new interest among investors.

IMAX's stock (IMAX) slid 4.2% trade on volume that FactSet data show was more than double the full-day average, to close at the lowest level since Oct. 14.

The stock suffered although "Star Wars: The Force Awakens" produced a record global weekend for the movie-theater company, including opening-weekend records for both domestic-and international openings.

J.P. Morgan analyst Alexia Quadrani said IMAX's domestic market share for the weekend was an "impressive" 12.6%, and that the movie's opening in China early next month would be a significant contributor to results given IMAX's large presence in the world's second-largest box-office market.

Analyst Eric Handler at MKM Partners said per-screen average for "Star Wars" showings at IMAX theaters was nearly $77,000, the highest total ever for the company. "The bar was set high for "Star Wars: The Force Awakens" and the film delivered in setting a new opening weekend record...and beating forecasts," Handler wrote in a research note.

There are a few reasons why the stock may be suffering in the fact of a strong "Star Wars" performance:

1) This old Wall Street adage: "Buy the rumor, sell the news." That describes the tendency of many investors to buy a stock if they believe good news is coming, then to cash in their bets when the good news arrives. The bigger the hype, the harder the stocks fall.

IMAX's stock soared 17% from the end of September through Dec. 16, the day before the movie opened, while the S&P 500 index gained 8% over the same time.

2) Although the "Star Wars" blowout opening weekend pushed quarter-to-date box-office revenue growth into positive territory compared with a year earlier, the company's overall fourth-quarter box office continues to track below consensus expectations of 10% to 12% growth, MKM's Handler said.

"In our view, the box office is more likely to finish up (DIS) in the 4%-6% range," Handler wrote in a note to clients.

3) Walt Disney Co., which owns the "Star Wars" franchise, may be charging theaters ("exhibitors" in Wall Street lingo) more than usual to be able to show the movie.

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