Big Screen Stock Soars on Blockbuster Q2 Earnings

Entertainment technology platform operator IMAX Co. (NYSE: IMAX) stock hit 52-week highs following its robust Q2 2024 earnings release. The company has been able to survive and thrive in the motion picture industry even as cinemas and movie theater operators struggle. While consumers flock to IMAX theaters for larger-than-life viewing experiences, IMAX doesn’t actually own or operate them. IMAX is an asset-light technology company that collects revenues primarily from system sales, licensing fees, and box office revenue-sharing agreements.

IMAX operates in the consumer discretionary sector, competing with entertainment technologies companies like Dolby Laboratories Inc. (NYSE: DLB) and has revenue-sharing agreements with cinema operators like AMC Entertainment Holdings Inc. (NYSE: AMC) and Cinemark Holdings Inc. (NYSE: CNK).

The IMAX Experience Can’t Be Duplicated At Home

IMAX provides a significantly enhanced visual and audio surround sound experience for theatergoers. Its massive screens are 59 feet x 79 feet, and they are curved and tilted to enhance immersion. The 15/70mm IMAX format generates images up to 18k resolution and 40% more images on the screen than standard cinemas. Its tiered stadium seating design ensures an unobstructed view from every seat. Moviegoers are willing to pay up to 35% more to view movies in IMAX format. While streaming services have taken a big bite out of movie theater revenues, they haven’t impacted IMAX because the full experience can only be had in an IMAX theater. In this sense, IMAX literally has a monopoly on the best cinematic experience available today.

IMAX Stream of Revenues

IMAX collects its revenues from the sale of its proprietary projection and sound systems and the licensing of its technology. While some movies can be digitally remastered to adapt to IMAX screens, they aren’t as sharp and detailed as true IMAX format movies. Instead, movie studios and production companies must license IMAX technology to use specialized IMAX cameras and equipment when filming and editing. Major blockbuster films almost always include 2D and 3D IMAX versions, like Deadpool & Wolverine by The Walt Disney Co. (NYSE: DIS).

IMAX receives a piece of the box office through its revenue-sharing deals with theater chains. IMAX is also growing its business in China through Wanda Film, closing the largest exhibition agreement in five years. Its international expansion is gaining speed through India, the Middle East, and Southeast Asia. In 2025, there will be a record of at least 14 films shot with IMAX cameras.

IMAX Triggers an Ascending Triangle Breakout Pattern

The daily candlestick chart for IMAX illustrates an ascending triangle breakout pattern. This pattern formed with an ascending (rising) lower trendline connecting the higher lows from $14.96, converging with the flat-top upper trendline at $17.64. IMAX triggered the breakout through the upper trendline a few days before its Q2 2024 earnings release. IMAX gapped on its release and has continued to rise toward new 52-week highs. The daily relative strength index (RSI) has risen to the 80-band. Pullback support levels are at $18.16, $16.43, $15.64, and $14.96.

IMAX Triples Consensus EPS Estimates 

IMAX reported Q2 2024 EPS of 18 cents, beating analyst expectations for 5 cents by 13 cents. Revenues fell 9.2% YoY to $88.96 million, beating consensus estimates of $74.52 million. The company’s Q2 revenues were boosted by the sale of its IMAX original documentary “The Blue Angels,” which is an example of how it is diversifying its content portfolio and revenue mix.

IMAX Systems Sales Growing

Signings for new and upgraded IMAX systems surged 89% to 87 in the quarter. System installations rose 20% to 24. IMAX raised its installation guidance to 130 to 150 systems for the full year 2024, up from 128 in 2023. Each new system represents more revenue-sharing opportunities. The system sales slate through 2026 is the strongest ever.

Solid Slate Through 2026

IMAX started Q3 2024 strong, as a June surge of films pushed Global Box Office sales to $196 million. Momentum will continue with the record box office generated by Deadpool and Wolverine, released July 26, 2024.

IMAX CEO Rich Gelfond commented, "Several signs across our financial and operating performance in the second quarter underscore our building momentum — we beat consensus across most metrics, generated strong cash flow, delivered our most quarterly signings for IMAX systems in six years, and expect to install a higher number of IMAX systems in 2024 over the year prior."

IMAX analyst ratings and price targets are at MarketBeat. There are 10 Wall Street analyst ratings on IMAX stock, comprised of one Strong Buy, seven Buys, one Hold, and one Sell, with a 17.25% upside to the consensus average price target of $23.56. IMAX has a 9.66% short interest.  

Source MarketBeat