IMAX, with Hollywood strikes and the pandemic behind it, poised for growth, say analysts

By James Rogers

IMAX is well positioned for upcoming blockbusters as the box office rebounds, say analysts

IMAX Corp., is well positioned for growth, say analysts, as the company puts the disruption of the Hollywood actors and writers strikes and the COVID-19 pandemic behind it.

The high-end movie theater operator's shares rocketed following IMAX's (IMAX) second-quarter results Thursday, climbing 8.8% to register their biggest daily percentage gain since Feb. 28, when they gained 11.1%. The stock is up 2.5% Friday.

In a statement released IMAX Chief Executive Rich Gelfond said that the strikes, and the lingering effects of the pandemic are "firmly behind" the company. "The second quarter offered strong evidence that we are at in inflection point in our business; we are on a tear with system sales activity, our system installations are up significantly, and the slate through 2026 is as strong as we've ever seen," he added.

Related: AMC's summer box office set to 'rebound notably' says Wedbush

In a note released Thursday, Benchmark analyst Mike Hickey wrote that IMAX is preparing for major growth, citing upcoming blockbuster movies and strong signings for the company's systems.

"IMAX has emerged strong following the end of industry strikes and the pandemic, with the second quarter of 2024 marking a turning point characterized by significant growth in system sales and installations," wrote Hickey. "IMAX raised its full-year 2024 installation guidance to 130-150 systems, up from 128 in the previous year." Benchmark raised its IMAX price target to $27 and maintained its buy rating for the company.

IMAX said that signings for new and upgraded IMAX systems grew to 87 during the second quarter, up from 46 in the same period last year. In a statement, the company also pointed to a "June surge of film hits" and noted that the third quarter is off to a strong start with "Twisters," which opened July 19, and "Deadpool & Wolverine," which opens Friday.

Related: 'Inside Out 2' scores massive $155 million opening, second-biggest ever for an animated film

Wedbush also noted that IMAX beat second-quarter estimates ahead of a box office turnaround. "We expect the release slate to return to smooth sailing from here, with multiple catalysts still ahead in the coming months," wrote Wedbush analyst Alicia Reese, in a note Friday. "While IMAX outperformed a tough market in 1H:24, we expect it to resume overall growth in 2H:24 and 2025." Wedbush raised its IMAX price target to $24 from $22 and maintained its outperform rating.

Major movies coming out over the coming months include "Alien: Romulus," which opens Aug. 16, "Beetlejuice Beetlejuice," the sequel to Tim Burton's 1988 comedy horror film, which hits theaters Sept. 6, and "Joker: Folie À Deux" starring Joaquin Phoenix and Lady Gaga, which opens Oct. 4.

Wedbush, which has IMAX on its Best Ideas List, expects the company's shares to rebound throughout the second half of 2024. "Shares rose on a positive Q2 report, marking the turning point," added Reese.

Related: 'Dune: Part Two' spices up the box office with $81.5 million opening weekend

The analyst firm notes that movies filmed with IMAX cameras are increasingly standing out in terms of critical acclaim and box office receipts, pointing to the success of "Top Gun: Maverick," "Oppenheimer," and "Dune: Part Two," which opened earlier this year. "IMAX no longer has to sell directors or studios the benefits of filming with IMAX cameras," wrote Reese. "Instead, IMAX parlayed all the awards season buzz around Oppenheimer and the theatrical buzz around Dune 2 to book more projects with IMAX cameras."

Macquarie Equity Research also raised its IMAX price target, to $26 from $24, and maintained its outperform rating for the company. "IMAX remains one of our top small-cap Gaming/Lodging/Leisure picks given the embedded growth from its backlog, improving margins and FCF [Free Cash Flow], and exposure to a strong blockbuster pipeline," wrote Macquarie analyst Chad Beynon, in a note Thursday.

Of 11 analysts surveyed by FactSet, nine have a buy rating, one has a hold rating, and one has a sell rating for IMAX.

Related: Imax, Cinemark shares could offer upside in 2024 despite challenges for movie theaters, Macquarie says

IMAX shares are currently up 11.9% this week, putting them on pace for their best weekly performance since the week ending July 28, 2023 when they rose 13.6%, Dow Jones Market Data shows.

The company's are up 32.3% in 2024, outpacing the S&P 500 index's SPX gain of 14.2%.

-James Rogers

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07-26-24 1104ET

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