After the temporary spike this morning on a smaller than expected loss it would appear that momentum in RLD is to the downside. It had a very weak close today and it failed to bounce with the market this afternoon. Near term support is at $9.94 or so but with the lack of a near term catalyst I see RLD possibly testing the $8.50 region over the next few weeks.
This puppy is still sick and continues to trend lower. I left some money on the table by cashing out my puts a little too soon but hey nobody goes broke taking profits. If this breaches $8.00 to the downside it could get really ugly once again.
RealD’s shares are touching all-time lows, falling 4% to $7.71 in mid-day trading, after Stifel analyst Benjamin Mogil downgraded the 3D technology company to “Hold” from “Buy.” The company is at an “inflection point,” he says. It continues to build 3D screens domestically on top of the 13,100 at 2,900 locations it had at the end of June. That’s worrisome because “there are few weekends where 3D screen capacity is an issue” and “given declining 3D demand appears to us to be unnecessary.” The danger is that exhibitors will feel empowered to bargain for lower equipment rental rates when their contracts with RealD are up for renewal. Lots of its contracts with theater owners including Regal, AMC, and Cinemark will expire before the end of 2018. In addition, RealD is investing to bring 3D to home viewers. But execs have not “articulated any timelines/benchmarks for these initiatives…nor have they articulated how much money whey are willing to spend.” That’s a problem because investors “have limited visibility on where the home market technology stands from a commercial perspective.” It might make sense for RealD to go private, Mogil says. But that would be difficult. Insiders own just 15% of the shares, and privatization “would crimp investments in the home [3D initiatives], a key for management’s growth platform.”
I will be curious to see if RLD makes a move early October. From the two year chart August and September's share price has taken a huge hit, but it manages to go up in October (for no major reason).. Probably a MM and hedge fund game going on, we will see.
One thing to note from the most recent earnings report is that the company still has about $14 million to buy back shares. The last time RLD was this low they started buying and the stock eventually had a nice run into the $13-$14 area. If it goes much lower they may start buying again.
This stock is worth $7.50 imo. Feel sorry for shareholders, this CEO can't figure out how to remain profitable much less grow EPS or FCF. The shift in strategy towards LUXE is admitting 3D is in deep trouble. This quarter indicates the beginning of a turnaround or a long decline. IF, and that's a big if, they succeed with LUXE and bring out glasses free 3D, maybe this stock will be worth more but you still have a CEO that can't figure out how to eke out profits.
For a period of time right around the time they went public 3D was looking like the next big thing. The troubles started mounting when the TV makers began discontinuing their 3D models. Now 3D TV is all but dead. I have to imagine that RLD believed that 3D TV was going to be their next big revenue stream if it caught on in a big way. With that idea dead RLD now has to rely purely on what 3D content is pushed out of Hollywood. Customers are clearly being more selective about what they want to see in 3D. IMHO, IMAX is the premium format to see a movie that is worth seeing in 3D to begin with. I have seen a few movies in RealD 3D and I have been less than impressed.