The Street Isn't Seeing The Big Picture For IMAX

Shares of IMAX Corporation (USA) IMAX are down 15 percent year-to-date, versus a 4 percent gain in the S&P 500. “We view the shares of IMAX as oversold and continue to believe in the company's long-term growth story,” MKM Partners’ Eric Handler said in a report. He maintained a Buy rating on IMAX, with a price target of $40.

The company’s shares have significantly underperformance traditional exhibitors and do not adequately reflect the positive events in 2016, including record installs, signings and backlog, analyst Handler mentioned.

Although IMAX has projected its box office results below expectations, this has resulted from China's industry slowdown and unanticipated structural issues. Handler pointed out.

Significant Expansion Opportunity

IMAX is expected to deliver a record year of installs, with 155 screens, and has a strong deal pipeline, with signings expected to exceed a record high of 300 screens and boost the backlog to more than 550 screens. This positions the company well for “what we view as a more attractive 2017 film slate,” the analyst stated.

Handler expects an improved film lineup from both Hollywood and China in 2017 and 2018. He further commented that the improved film outlook over the next couple of years and the rising number of screens offer “an opportunity for significant margin expansion.”

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