Imax Poised for a 30% Rally as Hollywood Recovers, Says Analyst
Imax, the company known for its immersive large-format movie screens, is predicted to experience a significant rally as the film industry recovers from the impact of last year’s strikes, according to Seaport Research Partners. Analyst David Joyce, who initiated coverage of the stock with a buy rating, believes Imax has the potential to surge by 30% from its current trading price. Joyce’s bullish outlook is based on several key factors, including the normalization of film releases, increasing consumer interest in unique cinematic experiences, and expansion opportunities in international markets.
Key Takeaways:
- Hollywood’s rebound: The analyst sees the film industry’s theatrical release schedule returning to normalcy, creating a favorable environment for Imax’s growth.
- Unique experiences: Consumers are demonstrably drawn to immersive experiences, signaling strong potential for Imax’s distinct format.
- International Expansion: Imax’s continuous expansion across global markets, particularly internationally, adds to its growth prospects.
- Misunderstood Valuation: Joyce argues that Imax is undervalued by the market and should be considered an "experience economy" play, similar to live entertainment or sports, rather than traditional media companies.
The Return of Blockbusters Fuels Imax’s Future
The recent Hollywood strikes, which halted production and delayed numerous film releases, significantly impacted the box office. However, Joyce sees the industry bouncing back, with this trend benefiting Imax in particular. He emphasizes that even with a few strong years of growth, the box office is unlikely to reach pre-pandemic levels, creating a runway for Imax’s recovery. "We think there is a distinct near-term opportunity for IMAX shares to start to recognize that the film industry’s theatrical release schedule will start heading toward normalcy," Joyce noted in his report.
Beyond the Box Office: A Shift Towards Experiences
Joyce recognizes the growing consumer appetite for unique experiences, a trend he believes directly benefits Imax. As people seek out more immersive entertainment, the allure of Imax’s larger-than-life screens and advanced audio technology becomes increasingly appealing. This demand for unique experiences should drive Imax’s share of the box office, further boosting its financial performance.
Globalization as a Growth Engine
Imax’s expansion strategy, particularly in international markets, further supports its growth potential. "Imax typically grows its network base by between 5% and 6% each year," Joyce stated. This ongoing expansion, coupled with the increasing popularity of cinema around the world, positions the company for continued international success.
The Misunderstood Value of Imax
According to Joyce, the market has not yet fully appreciated Imax’s potential as an "experience economy" play. He argues that Imax should not be compared to traditional media companies like studios or streamers, which face challenges like subscriber headwinds and substantial content investment costs. Similarly, he emphasizes that Imax cannot be solely evaluated alongside traditional theatrical exhibitors due to its comparatively small share of the total movie theatre screen market.
Instead, Joyce suggests that Imax should be valued like companies in the live entertainment, sports, or experiences sectors. This re-evaluation, he believes, could result in an upside of up to 44% for the stock.
A Look Ahead: Imax’s Earnings Report and Beyond
Joyce’s optimistic outlook comes ahead of Imax’s second-quarter earnings report, scheduled for Thursday. The stock has already experienced a strong year, surging over 18% since the beginning of 2024. Imax’s upcoming earnings report will provide valuable insights into the company’s performance and the analyst’s prediction for a 30% rally.
With Hollywood’s recovery on track, consumer interest in unique experiences on the rise, and Imax’s continued international expansion, the company’s future looks promising. As the market begins to recognize Imax’s true value as an "experience economy" player, the stock could be set for a significant upward trajectory.
