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Can IMAX Keep Going After Last Week's 12% Pop?

Image source: IMAX.

The multiplex is far from dead, and IMAX (NYSE: IMAX) continues to cash in. Shares of the provider of sensory-enhanced theatrical experiences soared 12% last week, following a bullish analyst note and encouraging financial results.

The actual report may not seem all that encouraging at first glance. Revenue for the second quarter clocked in at $91.7 million, 14% below where it was a year earlier. Two of its three segments showed sharp year-over-year declines despite its expanding theater base. Then again, that's easy to understand when one considers that last year's spring and early summer season treated moviegoers to huge blockbusters including Furious 7Jurassic World, and Avengers: Age of Ultron

The gross box office receipts from studio releases totaled $260.8 million for the second quarter, down substantially from $343 million it made in ticket sales a year earlier. Gross margin and earnings also went the wrong way, and understandably so given the scalability of the business. 

Things should get better. IMAX suggests that this was an anomaly given the record second quarter that it had a year earlier. It actually expects per-screen averages across its network for all of 2016 to be in line with historical returns, and that's encouraging when one considers how much bigger the network gets with every passing quarter. 

IMAX added 38 new theater locations and two upgrades during the quarter, taking its network count to 1,102 screens. It was at just 976 locations for its super-sized theatrical experiences a year earlier. 

A timely bullish call

Roth Capital analyst Darren Aftahi reinitiated coverage of IMAX just hours before its report. He is going with a buy rating and a $38 price target, encouraged by the network growth, healthy global box office trends, and the strengths of its differentiated tech platform. It was a great call in the short term. The stock soared 14% higher the following day.  

These are interesting times for exhibitors. Five movies topped $20 million in domestic ticket sales over the weekend. It's something that has only happened six times, and the last time it took place was 14 months ago.

The pipeline of movies having their releases remastered for IMAX's premium platform is also encouraging. Between now and the end of next year, we will have a pair of Star Wars franchise films as well as Marvel and DC superhero flicks that have typically fare well on IMAX's enhanced screens.

It's not the only pipeline to get excited about here. IMAX has inked deals for 95 future installations through the past three months, and its backlog now stands at 442 theaters. IMAX's latest quarter may have been a step back on many fronts, but it's only setting the stage for a big step forward in the coming quarters.

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Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends IMAX. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.