Shares in Imax Corp (IMAX) spiked 10% in Monday’s trading after the big-screen cinema specialist delivered an impressive opening weekend performance for “The Eight Hundred” in China.
“The Eight Hundred” represents the first major new release film to hit China’s screens since the COVID-19 pandemic began, and is the first Chinese film to be filmed entirely with IMAX cameras.
So far “The Eight Hundred” has generated an impressive ~$116M in box office revenues throughout China—with the ~650 IMAX screens showing the film contributing $7.5M, or roughly 6.5% of the box office total (from only 1% of the screens showing the film).
“Note that China represents ~46% of IMAX’s global installed screen base and generated ~33% of global IMAX box office revenues in 2019” commented B Riley analyst Eric Wold on August 24.
He reiterated his buy rating on the stock with an $18 price target (25% upside potential) following the box office report. (See IMAX stock analysis on TipRanks).
“We view these IMAX results positively given that the box office share is above typical levels in the low to mid-single-digit percentages and all movie theaters within China are currently limited to 50% capacity” commented Wold.
Given the current capacity limitations, the analyst says that he would not be surprised if the demand for the IMAX format has longer-than-usual legs in the coming days/weeks.
Through the week ending 8/16, IMAX reported QTD global box office revenues of ~$13M— which Wold says would indicate the potential for QTD box office revenues of ~$22M through this past weekend. He views the 3Q20 box office consensus estimate of $40-45M as attainable.
Net-net, for Wold, Imax remains a top idea when the global exhibition industry begins to reopen. This is down to (1) the company’s focus on high-profile, blockbuster films; (2) its highly variable cost structure; (3) an impressive screen backlog; and (4) a strong balance sheet that could lead to share repurchases and/or acquisitions.
Shares in IMAX are currently trading down 30% year-to-date, and the Street has a cautiously optimistic Moderate Buy consensus on Imax’s outlook. That’s with an average analyst price target of $15 (5% upside potential).
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