IMAX’s valuation is perplexing, Roth says

It’s ringing up a string of successes, but IMAX (IMAX Stock Quote, Chart, News, Analysts, Financials NYSE:IMAX) is still trading like your father’s exhibitor.

That’s the opinion of Roth MKM analyst Eric Handler, who in an April 10 report to clients said the stock is undervalued.

“In our view, IMAX shares are trading at a deeply discounted EV/EBITDA valuation for 2024E/2025E of 6.9x/5.9x, ~2.5-turns below the company’s average multiple from 2014-2019,” the analyst argued. “Additionally, valuation is below the 7.1x-11.7x trading range over that same time frame. IMAX is trading in line with traditional theater operator multiples (5.5x-9x), not an asset light, global technology platform with an expanding TAM, a strong balance sheet, is generating positive FCF, and is repurchasing its shares.”

In a research update to clients Wednesday, the analyst maintained his “Buy” rating and price target of $22.00 on IMAX.

Handler thinks the company will post EBITDA of $142.1-million on revenue of $381.6-million in fiscal 2024. He expects those numbers will improve to EBITDA of $169.2-million on a topline of $427.2-million the following year.

The analyst gave his outlook for the second quarter at the box office.

“We forecast 2Q GBO for IMAX of $234mn (-13%), which should mark the low point of the year on both an absolute and relative basis,” he wrote. “The quarter should benefit from key Hollywood titles, including carryover from Godzilla x Kong along with The Fall Guy (5/3), Kingdom of the Planet of the Apes (5/10), Furiosa (5/24), Bad Boys 4 (6/7), and A Quiet Place: Day One (6/28). Last year’s same quarter was highlighted by the success of The Super Mario Bros. Movie ($45mn+ GBO), Guardians of the Galaxy: Vol. 3 ($45mn+ GBO), Fast X ($33mn+ GBO), and Spider-Man: Across the SpiderVerse ($32mn+ GBO). Local language titles could prove to be a swing factor. There isn’t a lot of visibility yet with China’s upcoming titles but there are other countries which could prove impactful. To that point, this upcoming weekend has five new, local language movies in release, including K-Pop concert film Suga, Agust D Tour “D-Day” on 573 screens in 55 markets, including North America, two titles from India — Bade Miyan Chote Miyan and Maidaan, an Indonesian title, KKN2: Curse of the Dancing Village, and Japanese franchise title, Detective Conan: The Million Dollar Pentagram.”