IMAX Corp is a Buy, says Roth Capital

Roth Capital Partners analyst Eric Handler is staying bullish on IMAX Corp (IMAX Corp Stock Quote, Charts, News, Analysts, Financials NYSE:IMAX), saying in a Tuesday report on the company that IMAX is the best way for investors to play the recovery in theatre box offices.

IMAX, which operates with four business segments in IMAX Technology Network, IMAX Technology Sales and Maintenance, New Business Initiatives and Film Distribution and Post-Production, announced earlier this month that it set a new company record for first quarter box office with $273 million, which was over $10 million above its previous record set in 2016. According to the company, a strong global mix of releases including Avatar: The Way of Water boosted global gross box office (GBO).

“The first quarter is an excellent indicator of the promise we see in 2023 — a year in which we expect to return to our record-breaking levels of box office from 2019,” said Rich Gelfond, CEO of IMAX, in a statement.

Handler said the higher than expected GBO at $273 million was above his forecast at $255 million. As a result, the analyst has raised his Q1 revenue and adjusted EBITDA estimates from $70 million to $81 million on revenue and from $26 million to $27 million on EBITDA.

Handler noted that the GBO growth was broad based, with China being the single largest market with GBO of $98 million, up 97 per cent year-over-year, followed by the International ex-China market at $96 million, up 60 per cent year-over-year. Domestic GBO was up 25 per cent to $79 million.

“We continue to view IMAX as the best way to play the box office recovery. This view reflects the company’s global footprint and its increasing exposure to local language content along with its asset light business model and strong balance sheet,” Handler wrote.

Handler said there’s a halo effect related to the success of Avatar, one which should help fuel demand for IMAX systems going forward. He estimated IMAX has had at least 20 system signings so far this year, with Japan being a particularly robust market and generating seven new signings. 

“All seven [Japanese] systems which are part of the recently signed agreement with AEON will be installed by this summer and take the company’s footprint in Japan to 48 locations (of which 31 of these locations exceed $1 million of gross box office annually, well above the circuit average),” he said.

Looking further ahead, Handler thinks IMAX will generate full 2023 revenue and EBITDA of $366.1 million and $121.7 million, respectively, and 2024 revenue and EBITDA of $399.9 million and $135.1 million, respectively.

With the update, Handler reiterated a “Buy” rating on IMAX and $24.00 target, which implied at press time a return of 15.8 per cent.