These days, there are not too many oversold TSX stocks, as investor sentiment remains high and the economy remains resilient. Pockets of strength can be found everywhere, with energy stocks and tech stocks especially strong.
But in this article, I’m interested in discussing a TSX stock that has been essentially written off by investors – Cineplex Inc. (TSX:CGX). In my view, this has created an opportunity to get in on an entertainment/movie exhibition stock at rock bottom prices.
Let’s look into this.
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Cineplex – First quarter strength peeks through
The theatre exhibition industry has been struggling to regain its footing in the last few years. First, we had the pandemic, which shut theatres down. Then we had the writers’ strike, which negatively affected content. And finally, we have the threat of streaming, which has actually been chipping away at Cineplex’s business since before the pandemic.
But today, I am left convinced that streaming is not the kiss of death that many have thought. It’s just another way to watch a movie that’s different, and it doesn’t eliminate the desire to go to the movie theatres. Cineplex’s results show this to be true. In its most recent quarter, the first quarter of 2026, Cineplex posted a 17.3% increase in attendance to 9.8 million. While this is more than 30% lower than the first quarter in 2019, the increase versus last year is worth noting.
Also, Cineplex’s box office revenues of $127.4 million were 25% higher than the same period last year. And it was the strongest first quarter box office since 2019. Additionally, theatre food service revenue of $108.2 million was also the highest Q1 revenue since 2019.
The benefits of diversification
While many of us tend to only think of Cineplex as a movie theatre chain, the company has managed to diversify its business in the last 10 or so years. Today, Cineplex’s earnings before interest, taxes, depreciation, amortization, and lease/rent (EBITDaL) are diversified across three businesses – movie exhibition, location-based entertainment, and media. They account for 44%, 13%, and 43% of EBITDaL, respectively.
Cineplex’s location-based entertainment (LBE) business maintained its strong margins in the quarter, and it continues to offer good diversification for the company. Its media business experienced a decline in the first quarter due to soft market conditions and a stronger year last year. But Cineplex’s movie theatres remain a captive place for advertisers to reach millions of consumers. Therefore, it remains a solid business with strong potential.
Theatrical windows on the rise
So, as discussed in the previous sections, while Cineplex is still worse off relative to before the pandemic, there are some glimmers of hope.
There’s also another very significant development that is very positive for Cineplex. Historically, theatrical windows were 90 days. This means that movie-watchers had to wait 90 days before a movie would be available for them to watch outside of the movie theatre. This window had been decreasing since the pandemic, which obviously spelled trouble for Cineplex. But more recently, the sentiment in the business has been shifting toward a recognition that longer theatrical windows are beneficial to all parties involved.
For example, Universal Studios recently announced that they will be extending the exclusive theatrical window for 2027 releases to 45 days. Is the pendulum switching back to the days of longer theatrical releases? It looks like it, and this is good for Cineplex. Even Netflix recently promised to release its latest Narnia film with a 49-day exclusive theatrical window in 2027.
The bottom line
In my view, Cineplex stock is an oversold TSX stock that has the potential for a turnaround in the imminent future. Investors are surely not sold on this idea, and generally remain negative on this stock. But this makes the opportunity even more compelling because Cineplex’s stock only reflects the negative – it’s an oversold stock. As Warren Buffett famously stated, “Be fearful when others are greedy, and greedy when others are fearful”.
