Analysts at Wedbush believe IMAX Corp (NYSE:IMAX) will likely outperform full-year estimates after reporting a record third quarter for earnings before interest, taxes, depreciation and amortization (EBITDA).
They believe the cinema equipment provider is on track to top its fiscal 2023 guidance on EBITDA margins in the mid-30s, installations of 110 to 130 screens, and total box office takings of $1.1 billion.
The company’s 3Q EBITDA of $45 million with a 47% margin bodes well for further margin expansion in the coming quarters and years, they wrote in a note to clients.
“IMAX’s global screen count should continue to expand for the next several years,” the analysts wrote. “We expect moviegoers to continue to drive IMAX’s market share higher as they increasingly opt for premium screens and the IMAX brand.”
The analysts pointed out that IMAX continues to gain market share domestically and has the potential to accelerate its EBITDA margin expansion as it gains share globally.
Continued expansion in local language is also expected, with 22% of the box office coming from local language titles compared to 12% in 2019.
But they noted that these positives should be balanced with the risk IMAX faces with the ongoing Hollywood labor strikes, as Hollywood titles are likely to be moved out of the summer 2024 release slate.
“That said, we think IMAX is poised to print consistently and expand profitability, while it has plenty of screen growth runway remaining in Asia, EMEA, and LatAm,” they wrote.
The Wedbush analysts reiterated their ‘Outperform’ rating on the stock and price objective of US$26.
IMAX shares traded up 1.5% at US$18.39 on Thursday afternoon.
“The bottom line is that IMAX is poised for continued global footprint growth, further market share gains, and margin expansion back to and likely beyond historic levels,” the analysts summarized. “With shares trading in line with debt-heavy exhibitors, we think IMAX shares are undervalued.”
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