IMAX Corp may be well-positioned to navigate the structural headwinds previously feared, such as competition from video-on-demand [VOD] and over-the-top [OTT] players like Netflix.
The evidence indicates that cinemas and content studios increasingly rely on IMAX to deliver premium experiences that consumers seek, creating a favorable cycle for IMAX.
Spotlight on Recent Data
Recent data shows a rebound in cinema attendance, countering concerns about a permanent decline due to competition from VOD and OTT services. According to a report by S&P Global, cinema attendance is improving, with AMC Entertainment reporting its most attended and highest grossing weekend since 2023.
The shift in consumer behavior is notable. Cinemas now offer not only new movies but also premium experiences that cannot be replicated at home. This aligns with the preferences of younger generations, who value experiences and are willing to pay more for them.
Large cinema operators have highlighted the success of their premium offerings in driving attendance:
Moviegoer sentiment is clear. Guests want to see movies on a huge silver screen, and they are consistently willing to pay more for the best possible experience…
…I hope that we can add more IMAX screens and Dolby Cinema screens. We are the largest IMAX exhibitor in the world outside of China, we’re the largest Dolby Cinema exhibitor in the world, we have about half of the IMAX locations in North America, we have all the Dolby Cinema locations in North America.
– AMC Entertainment Holdings 1Q24
This consistent outperformance is a direct result of our relentless efforts to elevate the guest experience and drive increased attendance and frequency through our alternative content and premiumization initiatives…
…In this quarter, 41% of box office revenue came from premium experiences like IMAX, UltraAVX, 3D and VIP.
– Cineplex Inc 1Q24
IMAX’s role in attracting consumers to cinemas creates a strong flywheel effect, drawing more studio content to IMAX screens, leading to more IMAX installations, and continuing the cycle.
Supporting data includes IMAX’s return to 2019 levels of global box office revenue, an increase in “filmed for IMAX” titles, and expanded partnerships with major exhibitors like Wanda Film in China.
The concerns about most systems being upgrades rather than new installations have been alleviated by recent data showing an increase in new IMAX systems installations. For instance, the number of new IMAX systems grew to 47 in 4Q23 and saw a 12% increase in 1Q24 compared to the previous year.
Valuation
A detailed analysis of IMAX’s valuation now includes estimates through FY27e, projecting sustained high-single-digit growth driven by accelerating adoption. Although FY23 adjusted EBITDA margins were lower than previously modeled, the long-term outlook remains positive.
Assuming a return to historical average multiples of 11x forward EBITDA, the stock is estimated to be worth ~$23, with shareholders positioned to enjoy attractive upside even at the current 8x forward EBITDA.
Potential Risks
The current macroeconomic environment poses challenges, with consumers potentially cutting back on discretionary spending, including more expensive IMAX tickets. This could delay cinema installations of IMAX systems.
Additionally, the availability of good movie slates is crucial for maintaining high attendance, and a prolonged lack of quality films could negatively impact IMAX system adoption.
Final Thoughts
Re-evaluating industry trends has led to upgrading the rating on IMAX from hold to buy. The shift in cinema value propositions towards premium experiences creates a favorable cycle for IMAX.
Supported by strong data points and a healthy backlog of installations, investing in IMAX could yield good fruits, with a possible price target of $23.
DISCLAIMER
You should read and understand this disclaimer in its entirety before joining or viewing the website or email/blog list of SmallCapStocks.com (the “Publisher”). The information (collectively the “Advertisement”) disseminated by email, text or other method by the Publisher including this publication is a paid commercial advertisement and should not be relied upon for making an investment decision or any other purpose. The Publisher is engaged in the business of marketing and advertising the securities of publicly traded companies in exchange for compensation. The track record, gains, upside, and/or losses mentioned in the Advertisement, if any, should not be considered as true or accurate or be the basis for an investment. The Publisher does not verify the accuracy or completeness of any information included in the Advertisement. While the Publisher does not charge for the SMS service, standard carrier message and data rates may apply. To unsubscribe from receiving promotional text messages to your phone sent via an autodialer, using your phone reply to the sender’s phone number with the word STOP or HELP for help.
The Advertisement is not a solicitation or recommendation to buy securities of the advertised company. An offer to buy or sell securities can be made only by a disclosure document that complies with applicable securities laws and only in the states or other jurisdictions in which the security is eligible for sale. The Advertisement is not a disclosure document. The Advertisement is only a favorable snapshot of unverified information about the advertised company. An investor considering purchasing the securities, should always do so only with the assistance of his legal, tax and investment advisors. Investors should review with his or her investment advisor, tax advisor or attorney, if and to the extent available, any information concerning a potential investment at the web sites of the U.S. Securities and Exchange Commission (the "SEC") at www.sec.gov; the Financial Industry Regulatory Authority (the "FINRA") at www.FINRA.org, and relevant State Securities Administrator website and the OTC Markets website at www.otcmarkets.com. The Publisher cautions investors to read the SEC advisory to investors concerning Internet Stock Fraud at www.sec.gov/consumer/cyberfr.htm, as well as related information published by the FINRA on how to invest carefully. Investors are responsible for verifying all information in the Advertisement. As an advertiser, we do not verify any information we publish. The Advertisement should not be considered true or complete.
The Publisher does not offer investment advice or analysis, and the Publisher further urges you to consult your own independent tax, business, financial and investment advisors concerning any investment you make in securities particularly those quoted on the OTC Markets. Investing in securities is highly speculative and carries an extremely high degree of risk. You could lose your entire investment if you invest in any company mentioned in the Advertisement. You acknowledge that we are not an investment advisory service, a broker-dealer or an investment adviser and we are not qualified to act as such. You acknowledge that you will consult with your own independent, tax, financial and/or legal advisers regarding any decisions as to any company mentioned here. We have not determined if the Advertisement is accurate, correct or truthful. The Advertisement is compiled from publicly available information, which include, but are not limited to, no cost online research, magazines, newspapers, reports filed with the SEC or information furnished by way of press releases. Because all information relied upon by us in preparing an advertisement about an issuer comes from a public source, it is not reliable, and you should not assume it is accurate or complete.
By your subscription to our profiles, the viewing of this profile and/or use of our website, you have agreed and acknowledged the terms of our full disclaimer and privacy policy which can be viewed at the following link: www.SmallCapStocks.com/Disclaimer and www.SmallCapStocks.com/Privacy-Policy
By accepting the Advertisement, you agree and acknowledge that any hyperlinks to the website of (1) a client company, (2) the party issuing or preparing the information for the company, or (3) other information contained in the Advertisement is provided only for your reference and convenience. The advertiser is not responsible for the accuracy or reliability of these external sites, nor is it responsible for the content, opinions, products or other materials on external sites or information sources. If you use, act upon or make decisions in reliance on information contained in any disseminated report/release or any hyperlink, you do so at your own risk and agree to hold us, our officers, directors, shareholders, affiliates and agents harmless. You acknowledge that you are not relying on the Publisher, and we are not liable for, any actions taken by you based on any information contained in any disseminated email or hyperlink.
I’m Nathan Goldstein, a writer and political analyst focused on simplifying complex social and political issues. My writing breaks down the intricacies of today’s society and politics to make them more understandable for you. I’m committed to providing clear and well-informed insights.
