IMAX Signs Deal to Expand in Europe - Analyst Blog

Leading global entertainment technology company IMAX Corporation IMAX has signed an agreement with Europe's Nordic Cinema Group to install an IMAX theatre at Nordic's SF Bio multiplex. This IMAX theatre will open its doors in the fall of next year.

Nordic Cinema Group – one of the major cinema operators in Europe with 590 screens – is keen to capitalize on the increased popularity of IMAX. It foresees the introduction of IMAX in the Scandinavian mall as a strong earning opportunity.

We believe this agreement will help the two companies to expand their respective businesses. It should prove particularly crucial for IMAX which reported dismal financial numbers in the recently concluded quarter. The bottom line fell below the Zack Consensus Estimate. Quarterly total revenue was $48.2 million, down 3% year over year, also short of the Zacks Consensus Estimate of $50 million.

However, in the quarter, IMAX generated strong theater signing, which resulted in record-high theater backlog. Recently, the company entered into a multi-picture agreement with Disney and received strategic investments in its Chinese venture. We believe these two developments will significantly benefit the company in the long term.

Earlier, IMAX's business model was focused solely on theater technologies and equipment. However, the company gradually adopted Hollywood box-office selling as its integral business wing. Management is focusing on three factors, namely scalability, product differentiation and penetration. Scalability aims at controlling operating costs to improve margin. Product differentiation involves significant progress in laser projection technology which differentiates the company's brand name and film presentation. Penetration involves signing of agreements to develop local language films outside the U.S.

Other Stocks to Consider

IMAX currently carries a Zacks Rank Rank #3 (Hold). Better-ranked stocks in the entertainment industry include Lions Gate Entertainment Corp. LGF, News Corporation NWS and The Walt Disney Co. DIS. While Lions Gate currently has a Zacks Rank #1 (Strong Buy), News Corp. and Walt Disney carry a Zacks Rank #2 (Buy).

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