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Sometimes stocks pop up on my screen and I'm like, "How the hell is this thing working so well ?" Here's what I think about IMAX Corporation. We keep hearing that no one goes to the movies anymore, right? However, IMAX shares have risen more than 60% in the past 12 months. So what the hell is going on here?
A lot of it depends on how IMAX makes money. Even if you were in an IMAX theater, it almost certainly wasn't theirs. They only own one location. Instead, the company sells or leases its theater systems and then makes more money for ongoing maintenance. Multiplex owners need to sell tickets, right? But IMAX makes money as long as movie theaters , as well as museums and science centers, continue to buy its equipment.
And since theaters are desperate to sell those tickets, they're happy to spend money on IMAX because they can charge a higher price when people actually come. That's why IMAX is performing very, very well. It turns out that 2024 was their second- best year ever at the domestic box office, and they achieved huge success overseas.
At the same time, the company creates its own IMAX documentaries, which have been surprisingly successful, such as “Blue Angels” on Amazon Prime. They are digitally remastering old concerts for IMAX screens, like "Queen Rock Montreal." This is a great performance by Freddie Mercury, which, after being updated for IMAX, became one of the highest-grossing concert films of all time.
How do you like that? They even work on sports broadcasts. So it's probably no surprise that IMAX showed great numbers. When the company reported in April, it showed a confident beating of revenue and profit forecasts, while domestic box office fell 7% for the quarter for the film industry as a whole.
That's why I was so confused that these guys could do so well. IMAX's worldwide box office was up 8% year-over- year. It was their best first quarter in terms of box office. It's no wonder that multiplex chains continue to pay for new IMAX theaters . Since the beginning of the year, the company has already signed agreements to install or upgrade over 100 systems, which is very impressive considering that they only signed 130 such agreements in the entire year of 2024.
As IMAX CEO Richard Gelfond said during a conference call, and I quote: "The fundamentals of the business have never been stronger." End of quote. They are now picking the cream of the crop in China, where the film business is growing rapidly. Additionally, IMAX receives higher commissions in China for these local releases.
Outside of China, IMAX sees growing opportunities for local- language films in international markets such as Japan and India. They also identified promising markets in Saudi Arabia, Vietnam, Indonesia, and Thailand. This sounds like a story for Netflix. These local language films are taking up an increasing share of the business.
If in 2019 they accounted for 12% of total global IMAX box office, then in 2023 this figure increased to 21%. And in the first quarter of this year, they provided 68% of the box office. Although it was significantly influenced by several big blockbusters in China. The IMAX business is also thriving here in the United States.
IMAX theaters alone accounted for 20% of the domestic box office for The Sinners, the highest-grossing original franchise in a long time. While second-quarter figures are n't available yet, we do know that some big 2025 releases, like the new Mission: Impossible, Superman, and James Cameron's upcoming Avatar sequel, were shot specifically for IMAX.
Next year, there 's a new Star Wars, a new Dune sequel, Christopher Nolan's version of The Odyssey, and even a new Toy Story. A good source of steady income for both Tom Hanks and IMAX. In 2027, we will see another Avengers, another Star Wars, another Batman, and Frozen 3. In the era of big-budget franchises, IMAX is king.
IMAX is also expanding its presence in the field of live sports broadcasts. In March, they sold out all the tickets for a screening of the classic match "Le Clasico". This is a football match between French clubs PSG and Marseille. Consider it the football version of the Yankees and Red Sox rivalry.
Exciting for IMAX, but not so much for Marseille fans. They lost 3-1. By the way, this is a score that is equal in significance to a Super Bowl defeat. Moreover , IMAX doesn't seem worried about streaming competition, because that's the main problem, right? Streaming platforms—no, they don't. In fact, management notes that Netflix's new film The Chronicles of Narnia, coming out next year, will have a 28-day theatrical release, exclusively on IMAX screens.
Additionally, Apple prioritized an IMAX release to secure a studio partner for the film "F1," which grossed $28 million in its opening weekend in IMAX. IMAX forecasts that box office receipts will reach $1.2 billion this year , which will be a record for the company. IMAX will receive a portion of these profits through revenue-sharing agreements with theaters.
But more importantly, the big box office has prompted cinema chains to invest more in IMAX systems. That is why in the first three months of the year the company installed 21 systems in cinemas. This is their second- best first quarter result of all time. In addition, AMC plans to open 12 new IMAX theaters and renovate almost the entire IMAX network in the United States.
In fact, last week Wedbush upgraded AMC. AMC? Yes, a worthless worm. Precisely because they have so many IMAX screens . This is something that can help a movie theater chain protect its market share. If the sheer number of IMAX screens is reason enough to upgrade the stock, then it's a great reason for the chain to buy even more of them .
However, analysts admitted that, and I quote: " they don't see significant growth in 2025, 2026 or beyond for AMC." End of quote. Personally, I wouldn't buy AMC stock. This is a loss-making business with a terrible balance sheet. Again, the movie theater business is in bad shape, with the exception of IMAX, which is why AMC shares are down more than 40% over the past 12 months, while IMAX is up more than 60%.
So don't be too clever. If you want to invest in cinema, IMAX might be the smartest way to go. While the stock is trading at nearly 25 times this year's expected earnings, which isn't exactly cheap, the fact is that IMAX is set to show 19% earnings growth this year and another 19% next; Paying 25 times the price for 19% growth is not bad.
That's pretty good. However, IMAX reports again next Thursday. And while I'm optimistic about the quarter, expectations have become very high, some would say ultra-high, as the stock has jumped 36% from its April lows. So, if you don't already own IMAX shares but want to buy a small stake before the report, please wait to see the results.
Maybe the shares will roll back and you will be able to buy them at a discount. So, in a time when movie studios and theater chains are struggling , IMAX has huge momentum because it's the best way to sell tickets. If you are at all inclined to invest in the film industry, IMAX seems like the best option.
Leonard from Wisconsin. Leonard. Greetings, gentlemen. This is a letter from Milwaukee. Greetings. How are you, partner? How are you, Eric? I'm fine. Everything is fine. I have a question for you about the "mouse." Is Disney still a good stock to invest in? OK. Disney experienced a real strong rise from the lows, but still only added 6.8%.
They have a good list of upcoming movies. Selling at only 20x earnings. Theme parks are showing incredible results. I think the answer is definitely yes. I think this is a very good asset for long-term holding, and I recommend buying it right now. So, IMAX is showing tremendous momentum in a volatile industry.
I think it's worth starting small, but waiting for the report before making big bets, including my exclusive interview with the CEO of Ollie's Bargain Outlet, considering that many retailers like Party City and Big Lots are closing. How does this affect a discount retailer like Ollie's Bargain Outlet?
Don't miss my exclusive interview. So everyone is competing to become the biggest and best AI chatbot , right? I'm Billy, and of course I'm taking all your calls in the fast-paced " Blitz Round " of today's episode, so stay tuned with Kramer.
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