IMAX (IMAX) is a niche player specializing in visually enhanced films and laser technology within the movie industry. Despite a pause in the theater business, the company just posted top-and-bottom-line beats for Q2, and shares have popped over 18% in the past month. IMAX offers a unique investment opportunity, harnessing its high-tech movie experiences and strategic global partnerships to drive growth and profitability. With steady growth in recent years and a promising outlook, the stock may be an appealing GARP opportunity for investors looking for an alternative to AMC’s (AMC) meme-stock mania.
IMAX Continues to Gain Market Share
IMAX is a global platform for technology, entertainment, and events. Its business operates in two primary segments: Content Solutions and Technology Products and Services. Key offerings include IMAX DMR, a unique technology that digitally remasters films into the IMAX format, and IMAX Enhanced, which extends technology across streaming content and devices for home entertainment.
As of June 30, 2024, 1,780 IMAX systems (1,705 commercial multiplexes, 12 commercial destinations, 63 institutional) operate in 89 countries and territories. Signings for new and upgraded IMAX systems increased to 87 (+89%) in the second quarter, while system installations increased to 24 (+20%). Consequently, the Company raised installation guidance between 130 and 150 systems for the full-year 2024 vs. 128 in the full-year 2023.
The demand for IMAX among filmmakers and studios has significantly increased. This surge is evidenced by the record-breaking number of 2025-release titles filmed for IMAX, which was more than double the previous record.
Analysis of IMAX’s Recent Financial Results
Imax has recently reported results for Q2 of 2024. The company reported revenue of $88.96 million, beating analysts’ projections of $76.01 million. However, a deeper look into the figures reveals a year-over-year decrease. Compared to the same period in 2023, total revenue declined by 9%, from $98.0 million to $89.0 million.
The gross margin fell year-over-year from 59.1% to 49.4%, while the adjusted EBITDA dropped from $35.9 million to $31 million. Additionally, net income and adjusted net income decreased by 57% and 33%, respectively, year-over-year. There was a similar decline in earnings per share, with the adjusted earnings per share falling from $0.26 in Q2 of 2023 to $0.18. Still, EPS exceeded the analysts’ estimate of $0.07.
The company finished the quarter with a cash reserve of $91 million and a total debt of $287 million. This reflects a decrease in net debt of $25 million. The availability of $300 million as borrowing capacity under the company’s revolving facilities contributes to the overall available liquidity of $392 million. The company invested $175 million to repurchase 11.5 million shares (19% of total outstanding shares) since 2020, focusing on driving shareholder returns. The remaining availability under the share repurchase authorization is $151 million.
What Is the Price Target for IMAX Stock?
The shares have been range-bound for the past few years, with a 33.75% return year-to-date. They trade at the high end of the 52-week price range of $13.20 – $20.49 and show ongoing positive price momentum by trading above the 20-day (17.69) and 50-day (17.07) moving averages. The stock looks to trade at a slight discount, with a P/S ratio of 3.05x, compared to the Entertainment industry average of 3.43x.
Analysts following the company have been bullish on the stock. For example, Barrington analyst James Goss recently reiterated a Buy rating on the shares with a price target of $25.00, noting the company’s global expansion potential, particularly in China, and strong future film slate.
IMAX is rated a Strong Buy overall, based on the recommendations and price targets issued by ten analysts. The average price target for IMAX stock is $25.33, representing a 26.08% potential upside from current levels.
IMAX in Summary
IMAX continues to make waves as a standout player in the movie industry, boasting steady growth and promising prospects. Despite the downturn in the theatre business, IMAX has shown resilience, exceeding financial projections for Q2. Though the recent financial results indicate a year-on-year decrease, its focus on driving shareholder returns and current price momentum suggests an appealing investment opportunity, especially for those looking for a viable alternative to meme-stocks like AMC.
