Imax shares jumped Thursday as one Wall Streeter sees major upside at the giantscreen exhibitor, the company gets it first Bollywood pic and its close partner in China, the Wanda Group, takes charge at AMC Theaters.
The stock closed up 4.1% at $20.00 Thursday after Susquehanna Financial analyst Vasily Karasyov predicted 20% upside and said softness in recent months “has created an attractive entry point” for investors.
“Though we expect Imax global box office growth to slow in the remainder of the year, we think the overall strength of this year’s slate compared to last year’s validates the company’s decision to focus on fanboy movies and shift away from family titles and demonstrates the network growth effect of capturing an increasing share of box office spending worldwide,” he said in a note to clients.
Before Thursday’s run-up, Imax shares were down 27% from their year-to-date high. He said the Imax business model was working well and investors should focus less on risk surrounding individual titles and more on network growth.
Imax has 64% penetration domestically and 18% internationally. Karasyov estimates that by 2014, penetration will reach 77% domestically and 40% internationally, assuming 120 total screen installations per year.
On Friday, Indian studio Yash Raj Films said “DHOOM:3” will be the first Bollywood production to be released in Imax format.
Imax CEO Rich Gelfond said at a conference last week that Imax is looking for a long-term toehold in the Indian market and continues to be very active in China, where it’s installing Imax systems and producing Chinese-lingo pics in a joint venture. China reps 20% of the company’s theater installs and 50% of its backlog, he said at the Goldman Sachs Communacopia confab. Unlike other regions, “China is not in recession,” he said.
Wanda happens to be China’s largest theater operator and just snapped up the second biggest U.S. exhib. “The Wanda acquisition of AMC is positive for us,” Gelfond said. “I think we know them as well, if not better, than anyone else. We have a wonderful relationship. They are amazing at branding and marketing (and) AMC is our biggest client” Stateside.