Investors afraid of the dark led a sell-off last week of shares of 3-D movie technology company RealD Inc., but some analysts say the Beverly Hills company’s future remains bright.
Since its initial public offering last July, shares of RealD have nearly doubled. They closed at an all-time high May 18, but then dropped 14 percent during the following week.
The sell-off appears to have been prompted by two concerns: newly raised issues regarding the brightness of digital projectors, and the poor domestic performance of the 3-D version of the latest “Pirates of the Caribbean” film.
A spokesman at RealD declined to comment.
Critics have long attacked 3-D projection as not bright enough. But a Boston Globe article published May 22 asserted that projectors designed for 3-D were also causing 2-D films to look dimmer when theater operators neglected to remove 3-D lenses from the projectors. The article traced problems to a specific Sony projector that uses RealD lenses.
Then the performance of the 3-D version of “Pirates of the Caribbean: On Stranger Tides” hijacked investor confidence when it accounted for only 46 percent of the film’s domestic sales during opening weekend. Most 3-D versions of a film account for at least 60 percent.
But James Marsh, an analyst at Minneapolis-based Piper Jaffray & Co., said both concerns are unfounded and he expects the stock to bounce back. He blamed the projection problems on Sony, not RealD.
Even if theater owners wanted to switch to a competitor in the short term, some of them can’t: AMC Theatres and Regal Entertainment have signed 10-year contracts with RealD.
“It’s not a RealD issue,” Marsh said. “It’s a Sony issue or it’s an exhibitor issue. It won’t have any impact.”
He added that the 3-D version of the new “Pirates” film accounted for a much higher portion – 66 percent – of international sales, offsetting its relatively poor performance domestically.
Of eight analysts following the company according to Bloomberg News, seven rate the stock a “buy,” while only one gives it a “sell” rating.
