One of last week's biggest winners was IMAX (NYSE:IMAX), which rose 15.1% after announcing a deal for more of its supersized screens in China. IMAX also benefited from generally bullish box office trends and multiplex giant AMC Entertainment (NYSE:AMC) striking a deal to open the first new movie theater in Saudi Arabia in 35 years. The AMC deal doesn't single out IMAX, but the transaction does potentially open up one more international market for IMAX to explore.

IMAX stock would go on to movie higher in each of last week's five trading days, but it's way too soon to start a victory lap. The provider of enhanced theatrical screenings still finds its shares trading lower year to date, and that's after back-to-back years of double-digit percentage declines. 

A green screen saying the words Must Be Seen in IMAX 3D for Warcraft on IMAX.

Image source: IMAX.

Waiting for the feature presentation

IMAX and its Chinese subsidiary are teaming up with Guangzhou JinYi Media to open 30 new IMAX theaters across China. Half of the theaters should be open by next year with the remaining installations completed before 2023. IMAX is hailing this deal as a tip of the hat to its more flexible approach to deal structures, aiming to optimize financial performance with terms set on a market-by-market basis.

China is a big market for IMAX. There are presently 543 IMAX screens in China, and last week's deal pushes the pipeline of installations contracted to open up to 342. The news comes at a welcome time for IMAX shareholders. China was a major pressure point for IMAX in its latest quarter. Overall  revenue and adjusted earnings may have exceeded analyst expectations, but the per-screen revenue average in China for the fourth quarter fell to $131,000 from $168,400 everywhere else.

The quarter's weakness was limited to China as per-screen averages actually rose outside of the world's most populous nation. There were some factors weighing on the year-over-year comparisons, but it was frustrating at the time to see IMAX's second-largest market slide. Was Chinese interest in IMAX screenings waning? Last week's deal doesn't provide a definitive answer, but a major multiplex operator in Greater China placing a large order for more screens is comforting. 

Then we get to Saudi Arabia. AMC Entertainment -- whose own stock had a monster week with a 17% gain -- just won the first cinema operating license in Saudi Arabia following a 35-year ban on new commercial theaters. Saudi Arabia expects to open 30 screens across 15 cities in the conservative kingdom, which is loosening its restrictions as a way to diversify from the oil industry. IMAX wasn't named in the deal, but as a longtime AMC partner, it wouldn't be a surprise if this operating license doesn't benefit IMAX sooner or later. 

Movie theaters are off to a decent start in 2018, fueled by the success of Black Panther becoming the highest-grossing movie since 2015's Star Wars: The Force Awakens. IMAX is going along for the ride, especially given the success of so many action films that play well in the supersized format. IMAX-screened films delivered $278 million in ticket sales worldwide in the fourth quarter, 13% ahead of the prior year's showing.

There is always the threat of multiplex operators kicking the tires of non-IMAX upgrade initiatives, but we're still seeing IMAX revenue outpace the movie theater industry. AMC entering Saudi Arabia and IMAX penetrating deeper into Greater China are signs that the multiplex isn't dying internationally, and that's obviously great news for IMAX investors, who had a good week after a couple of bad years.