RealD Shares Collapse to All-Time Low, Lose Nearly 21% of Value

Investors favor 2D over 3D after closing bell Thursday.

Investors were mulling over earnings reports from Regal Entertainment and RealD after the closing bell on Thursday looking for clues as to the health of the exhibition industry. Their conclusion: 2D good, 3D bad.

In after-hours trading, shares of RealD were collapsing to an all-time low, shedding nearly 21% of their value after rising 3% to $18.42 in the regular session.

Earnings for Regal, on the hand, were called by one analyst, Michael Pachter of Wedbush Securities, “good” and the stock was up more than 6% in the after-hours session.

RealD posted quarterly revenue down 8% to $59.6 million and net income that fell 5% to $9.4 million.

Chairman and CEO Michael Lewis told analysts on a conference call Thursday that they should spend less time focusing on the percentage of tickets sold in 3D and more time looking at the total dollars generated by those sales.

Lewis, citing rough estimates, used Harry Potter and the Deathly Hallows Part 2 to illustrate his point. The film made more than $500 million worldwide opening weekend with half coming from 3D, he said, yet “media and pundits” called it “a disaster and disappointing” for 3D.

“I’ll take one of those disasters every weekend,” he said.

Lewis also boasted of a 133% year-over-year increase in RealD screens to 17,500, and he said results would have been better except for “competition for 3D screens domestically” that “clearly had a limiting effect.” Before earnings, in fact, RealD disclosed that AMC agreed to install RealD in up to 1,000 additional screens in the U.S. and Canada.

Judging from the reaction of the stock, down almost $4 a share in after-hours trading, analysts and investors weren’t buying into the CEO's positive perspective.

Lewis also said on a few occasions Thursday that exhibitors and studios were discussing lowering the premium charged to see a film in 3D – “everybody is addressing the tough economic times,” he said, but if a price decrease is coming it won’t immediately harm RealD’s business because its royalties are “locked in.”

Lewis also said that RealD took a small hit internationally because so many consumers were reusing 3D glasses, negating the need for purchasing new ones.

As for Regal, the exhibitor reported a 3% rise in revenue to $753 million while net income surged nearly 650% due to tax advantages and cost savings.

The company declared a 21-cent per share cash dividend, reiterated its intention to regularly pay quarterly dividends and said it was “encouraged by the early third quarter box office results and the prospects for the remainder of the year.”

The results were in stark contrast not only to RealD but also to Imax, which said Thursday that a weak film lineup led to poor second-quarter results. That revelation caused Imax shares to drop 17%, or $4.21 on Thursday to $20.21.

In breaking out its quarterly revenue, Regal said Thursday that ticket sales rose 2.6% to $519.3 million, concessions were up 3.3% to $200.2 million and the category of “other” rose 5.3% to $33.8 million.