Shares of Imax Corp. were down more than 1% on light volume in premarket trade on Wednesday after the stock was downgraded to hold from buy at Benchmark. The box office in the second quarter of 2017 has been weaker than analysts and industry experts expected. Imax, more than most exhibitors, relies on blockbuster event films to drive revenue. So far this year, big budget blockbusters have been disappointing. Benchmark analyst Mike Hickey wrote in a note this will likely lead to the fifth straight quarter of declining global box office per screen averages for Imax. He estimates second-quarter revenue of $88 million, below Wall Street expectations of $102 million. "We initially anticipated that a more compelling surface film slate would reset per screen average growth, but the opposite has created an awkward acknowledgement that recent per screen average deteriorating could prove less than transitory," Hickey wrote in a note to clients. Imax has historically been the premiere film exhibitor, but Hickey said he's cautious that elevated enthusiasm moviegoers have for recliner seating has shifted share away from Imax. "We suspect current/forward valuation consideration focused on escalating global economic volatility and box office weakness, on-going concern over near-term execution risk, dilution from new initiatives and a weak second-quarter box office performance despite what appeared to be an exceedingly strong film slate," Hickey wrote. "We remain confident over their continued network growth that includes a recent acceleration in installations, on-going rationalized growth expectations and share price reduction." Shares of Imax have declined nearly 20% in the year to date, while the S&P 500 index has gained close to 9%.
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