IMAX Corporation: Strong Growth and Liquidity, but Still Expensive

IMAX Corporation continues to experience robust growth and strong liquidity, driven by the resurgence in demand for high-quality viewing experiences. However, the company remains pricey, making it essential for investors to weigh the risks and benefits before making a decision.

IMAX Corporation has been experiencing robust growth and strong liquidity, driven by the resurgence in demand for high-quality viewing experiences. The company has signed agreements for 130 new or upgraded systems so far this year, on par with the 130 signed in all of 2024. This momentum is evident in the reinvigorated North American market, where IMAX has signed agreements with nine new Domestic exhibitor partners in the last two years.

A recent agreement with Apple Cinemas will see five new IMAX with Laser systems in the United States, doubling the current IMAX footprint in Apple Cinemas locations. Under the agreement, IMAX will return to Philadelphia for the first time since 2020 in Apple Cinemas forthcoming Riverview Plaza, which is scheduled to open in 2026. The new IMAX location in Philadelphia is part of an expansion that includes an additional new IMAX system in a location to be identified, as well as upgrades to three existing IMAX locations in Maine, New Hampshire, and California.

IMAX's strong results have been powered by a knockout slate of films, with major Filmed for IMAX titles like "Tron: Ares" and "Mortal Kombat 2," and high-profile titles such as "Zootopia 2," "Wicked: For Good," and "Avatar: Fire and Ash" still to come. The agreement doubles IMAX's footprint with Apple Cinemas this year, from three locations at the start of 2025 to six locations across six different states by the end of 2027.

IMAX with Laser, the company's most advanced theater technology, offers crystal-clear, lifelike images and precision audio, powered by a ground-breaking 4K laser projection system, a new optical engine, and custom-designed lenses. This proprietary technology delivers brighter images with higher resolution, deeper contrast, and the widest range of colors exclusively for IMAX systems.

Despite its strong performance, IMAX remains pricey, making it essential for investors to weigh the risks and benefits before making a decision. The company's valuation has not changed significantly since my initial coverage, decreasing by -3.72%. The stock is still trading above the five-year average, suggesting a TP of $18.31. However, the P/S Ratio justifies the current price level, with the stock trading at 3.71x its sales per share relative to the average of 3.76x. This means that IMAX is already fairly valued today, with limited upside potential since the TP is only $25.71.

IMAX's robust liquidity remains one of its key features, with its cash flow from operations covering capex and other investing and financing activities. The company's cash level remains high and stable at $109M, and its debt level is still above $200M but also remains stable, with at least one-year maturity. With its Net Debt/EBITDA of 1.58x, IMAX only needs a year to pay all borrowings at once even if it doesn’t have to.

Technically, IMAX's momentum appears to be waning, with the stock failing to break above the June resistance and breaking below the key support level of $26. The price has also broken below both the 50-day and 200-day SMAs, proving its weakening momentum. Meanwhile, the 50-day SMA appears to be shifting its direction, showing that market sentiments have become less favorable recently. MACD and RSI explain this trend, with the stock becoming overbought and leading to numerous pullbacks.

References:
[1] https://www.marketscreener.com/news/apple-cinemas-and-imax-corporation-expand-partnership-with-agreement-for-five-new-and-upgraded-imax-ce7c5edfdf8cff2d
[2] https://seekingalpha.com/article/4813564-imax-corporation-its-robust-growth-and-liquidity-are-a-great-view-but-its-still-pricey