Analysts at Wedbush have reiterated their ‘Outperform’ rating and US$26 price target for IMAX ahead of the company’s upcoming second-quarter results due on Wednesday, July 26, after the market close.
The analysts wrote that, for 2Q, they expect the entertainment technology company to post revenue of $87 million, slightly below the consensus expectation of $88 million.
Earnings per share (EPS) is pegged at $0.16, again below the consensus of $0.17.
“While 2Q 2023 was likely the toughest quarter in 2023 for IMAX, we expect results to be lifted by accelerating installation pace as theatres continue to add more IMAX screens globally,” they wrote.
The analysts believe that IMAX stock, which traded hands at US$16.48 on Friday afternoon, is currently undervalued.
“The Street is currently valuing IMAX at 7x 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA), in line with a mature domestic theater chain,” they wrote.
“With IMAX’s significant global footprint growth potential and market share gains on its growing base of joint-venture screens, it is clear to us that IMAX shares are currently undervalued.”
They highlighted that IMAX remains on their “Best Ideas List” as, in their view, it is the best way to play the theatrical rebound in 2023 as the company gains market share.
Additionally, they view IMAX as best positioned to gain from consumers’ ongoing shift toward premium screens.
“We expect moviegoers to continue to drive IMAX’s market share higher as they increasingly opt for premium screens and the IMAX brand,” they wrote.
The analysts also highlighted that IMAX is solidly positioned to benefit from the ongoing economic rebound in China in addition to noting its growing global relevance with the expansion of its local language content, with 30 to 40 titles expected in 2023.
“IMAX is poised to print consistent and expanding profitability, while it has plenty of screen growth runway remaining in Asia, EMEA, and LatAm,” they wrote.
“IMAX’s growing slate of local-language content options across its global markets reduces its reliance on Hollywood content, which may be delayed next year with the current union strikes.”
They noted that IMAX’s risk exposure to the strikes is limited unless they last several weeks longer. “We think an extended actors' strike is unlikely,” they wrote.
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