If you like big films and you cannot lie, there's a pretty good chance that you've been to an Imax (IMAX -1.77%) screening. You'll pay a couple of bucks more than a traditional movie ticket, but the high-end mastering, supersized screen, and robust sound system make it an experience that one can't easily duplicate at home.
The one thing that isn't huge is Imax's share price. The stock is trading in the mid teens, 65% below the all-time high it hit nine years ago. In a rising market, Imax shares have fallen 9% over the past year. The recovery wasn't scripted this way. Movie theaters had their best year 2019 in terms of ticket sales. Why isn't Imax riding high? With the bar-raising innovator in theatrical experiences reporting financial results this week, it's time for a feature presentation that will likely move the stock one way or another.
Screen on me
There were $1.06 billion in Imax admissions sold worldwide last year, only the second time that the platform generated 10 figures worldwide. It doesn't mean that this is Imax's second biggest year in terms of actual tickets sold, as higher ticket prices on this end of the pandemic have helped lift box office receipts. Expansion over the years is also helping extend the brand's reach.
When it reports fourth-quarter on Tuesday afternoon it doesn't mean that Imax will wow investors by topping $1 billion in revenue for all of 2023. The company's top line is substantially lower, as ticket sales are shared with multiplex operators and the movie studios that make the films. However, Imax also generates a healthy chunk of change selling or leasing and then maintaining its systems. It also assists studios with mastering films on its supersizing technology.
Despite the uninspiring stock chart it's been a monster year for Imax. Revenue over the past four quarters is 24% higher than the prior year. It finally returned to profitability. Oppenheimer was a key driver in its near-record ticket sales. Imax is at its best when there's a healthy flow of films.
Image source: Getty Images.
Coming attractions
Expectations aren't high heading into this week's update. The last three months of 2023 were a dud for big-ticket productions. Hollywood production strikes bumped some promising projects into 2024, and Imax will feel the pinch. Analysts see revenue declining 12% with an even bigger hit on the bottom line. Wall Street pros are bracing for a profit of $0.05 a share, well below the $0.19 a share it generated a year earlier when Avatar: The Way of Water was drawing huge crowds and China's The Wandering Earth 2 set records in that Imax-loving country. Thankfully it has trounced net income targets by a double-digit-percentage margin in each of 2023's first three quarters.
Things should get markedly better from here. Dune: Part Two -- one of the big films initially slated for release in November of last year -- opens this weekend. Godzilla X Kong: The New Empire and Ghostbusters: Frozen Empire are also hitting an Imax screen near you in March. There will naturally be even bigger movies coming out this summer and beyond.
Imax trading for less than 20 times forward earnings may not seem very exciting, but it's in a great spot as a differentiated movie theater stock. Folks are coming back to movie theaters, particularly internationally where the company generates the lion's share of its business these days. This week's report may not be great, but it has the ammo from a compelling lineup of upcoming films to paint a rosier picture of its near future. There's still time for a Hollywood ending.
