Imax Wins Analyst Praise On Strong Film Slate, But China Market Volatility Raises Concerns

Wall Street analysts rerated Imax Corp IMAX after its first-quarter results Wednesday.

Rosenblatt analyst Steve Frankel maintained Imax with a Buy rating and a $35 price target Thursday.

JP Morgan analyst David Karnovsky reiterated a Neutral rating on Imax with a price target of $26 Thursday.

Also Read: Strong Slate, Premium Push Fuel IMAX Forecast Upgrades, Says Analyst

Rosenblatt: Fueled by the runaway success of Ne Zha 2, Imax reported $86.7 million in revenue (+9.5% Y/Y) and $37.0 million in adjusted EBITDA, well ahead of both Frankel’s $82.8 million and $26.9 million and the consensus of $84.0 million and $27.4 million.

The quarter also featured the signing of 95 new screens (and over 100 so far this year), reflecting the industry’s anticipation of a strong film slate in 2025 and 2026, as well as consumers’ growing preference for premium cinema experiences, especially IMAX.

The second quarter is off to a strong start with A Minecraft Movie and Sinners, where Imax accounted for 18% of the film’s opening weekend on a global basis. From now until August, every Imax Hollywood release is part of the Filmed for Imax program, which sets the stage for material to over-index and drive the box office upside. Importantly, it is not just about Hollywood.

This year is set to be a record period for local language films, boosted by Ne Zha 2 and other titles in China, Japan, and India that are expected to perform well. In 2019, local language represented 12% of GBO, rising to 21% in 2023. In the first quarter, the local language was 68%.

Imax continues to command a growing portion of the market, accounting for 3.5% of the global box office on less than 1% of the screens. In China, the company’s share hit a record 5.4% in the first quarter, compared to 3.8% the previous year. Domestically, Imax accounted for 3.6% of the market in the first quarter, down from the 4.5% share it had in the previous year’s Dune 2.

Frankel projected second-quarter revenue of $83.95 million and adjusted EPS of $0.19.

JP Morgan: Imax shares were up ~5% post-market close after reporting first-quarter results. Revenue and adjusted EBITDA were $87 million and $37 million, compared to JP Morgan estimates of $85 million and $32 million. Content Solutions’ gross profit was a beat on margin, with management citing the greater contribution of local China content and a more efficient marketing strategy in the region that leveraged social channels.

At Tech Products and Services, STL/ hybrid installs of 13 compared to the 5 Karnovsky modeled and helped drive a beat on gross margin. Free cash flow in the first quarter, net of growth capex, was -$7 million, an improvement from -$18 million in the year prior.

Imax disclosed system signings of 95 in the first quarter, with the increase Y/Y partly reflective of a recently announced agreement with AMC Entertainment Holdings AMC. First-quarter box office indexing was reported at 3.5% globally and 5.4% for China, a record. Karnovsky estimates that the US was at 3.6% (down from 5.9% in the first quarter of 2024, which featured Dune 2).

The company maintained guidance for 2025. Management did state that the results were tracking ahead of expectations, and a reiteration of the outlook after only a quarter was not a surprise. On the topic of China, CEO Richard Gelfond commented that a ‘moderate’ reduction in film imports would target movies with limited box office potential, not the kind the company distributes.

Karnovsky noted the wording of the China Film Administration’s recent announcement, which stated that it would consider market demand in its decision-making. Management also asserted there had been no reduction in activity among Chinese exhibitors and their interest in Imax, but rather that this had increased on the back of Ne Zha.

Overall, Karnovsky is incrementally positive following the solid print and commentary on China, which should ease investor concerns to a degree, even as the analyst expects some near-term risk to persist, given the volatility of the situation.

Karnovsky projected second-quarter revenue of $90 million and adjusted EPS of $0.05.

Price Action: IMAX stock is down 2.66% at $23.46 at last check Thursday.

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