Optimism Begins to Unwind On Struggling IMAX Stock

Earlier this week, brokerage firm Wedbush cut its price target on IMAX Corp (NYSE:IMAX) to $30 from $31. Piper Jaffray followed this up by downgrading the stock to "neutral" from "overweight" this morning, and slashed its price target to $21 from $28. The analyst in coverage said moviegoers are becoming less likely to pay the higher prices for IMAX movies, and that the market in China is becoming oversaturated. As such, shares of the entertainment technology provider are under pressure yet again.

So far today IMAX stock has shed 2.4% to trade at $19.95, putting it on pace for a sixth straight down day. This is just part of a longer-term trend that's seen the shares nosedive since their record high near $44 from back in June 2015. In 2017 alone, the security declined by 26.3%. Despite all this, sentiment is pretty rosy across Wall Street.

Most notably, six of the eight analysts in coverage rate IMAX a "strong buy," with another handing out a "buy" recommendation and zero "sell" ratings on the books. Moreover, the equity's consensus 12-month price target of $29.04 implies upside of almost 46% from current levels. All of this would suggest it's a strong possibility this week's bear notes will not be the last to come through on the stock, hinting at more headwinds on the horizon.

It's also worth noting that the long-term decline in the share price of IMAX has almost perfectly coincided with the number of shares held by short sellers. In other words, the stock has failed to benefit from falling short interest levels, which points to a dearth of buying power. And, of course, if these bears are emboldened by the recent technical weakness and short interest starts to rise, the chances of a IMAX rebound would be that much slimmer.