The big-screen maker is about to get even bigger. Shares of IMAX
Half of the screens will begin rolling out come July, with the remaining screens going up in 2009 and 2010.
The deal is huge because it grows the installed base of IMAX screens while also validating the company's nascent push to digital projection systems.
Both of those points are important. IMAX closed out the third quarter with nearly 300 screens in 40 countries. Tack on the 100 screens to a healthy backlog of pending orders from other exhibitors, and IMAX's empire will grow significantly in a hurry.
That's important, because the fastest-growing line item at IMAX has been its cut from turning conventional theatrical blockbusters into its bigger-than-life celluloid. It costs the same to remaster a flick for 50 screens as it does for 500. The difference in the past has been the cost of producing the reels, but going digital eliminates that.
AMC isn't the only multiplex operator installing IMAX screens in its hottest markets. Chains like Regal
Even before you consider the ambassadorial implications, the AMC deal is a juggernaut in and of itself.
In an Associated Press article, Roth Capital Partners analyst Richard Ingrassia relays how the deal is worth up to $4.50 per share based on management assumptions. That's not too shabby for a stock that closed yesterday at $4.64.
Even if the assumptions are overly optimistic, IMAX is back in a good groove. It has never had a problem securing content. Movie studios like Time Warner
Turning a profit consistently on the lumpy installations has been the real heartbreaker. With IMAX now ready to add considerably to that base over the next several quarters, steadier film revenue will become the company's dinner bell.
IMAX screens can stretch as much as eight stories high. As far as story stocks go, IMAX itself finally has the catalyst it needs to let investors see the big picture.
For other IMAX articles:
IMAX has been recommended to Motley Fool Rule Breakers subscribers. No, it hasn't panned out that well, even with today's big run, though the average pick is still beating the market. Time Warner and DreamWorks Animation are Stock Advisor selections. Toy around with either newsletter with a free 30-day trial.
Longtime Fool contributor Rick Munarriz is a movie buff but does not own shares in any of the companies in this story, save for DreamWorks Animation. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.