IMAX Corporation: Poised To Enjoy A Flywheel Effect (Rating Upgrade)

Core Viewpoint - The investment rating for IMAX Corp. has been upgraded from hold to buy due to a favorable shift in cinema attendance dynamics and the company's strong positioning in the premium experience market [1][13]. Cinema Industry Trends - Cinema attendance is rebounding, with AMC Entertainment reporting its most attended and highest-grossing weekend since 2023, indicating that the cinema industry is not in permanent decline [3]. - The value proposition of cinemas has shifted from merely showing new movies to offering premium experiences that cannot be replicated at home, aligning with younger generations' preferences for unique experiences [4]. IMAX's Market Position - IMAX has returned to 2019 levels of global box office revenue, with approximately $1.046 billion in LTM box office as of 1Q24, compared to $1.1 billion in 2019 [5]. - There are 14 "filmed for IMAX" titles scheduled for 2025, more than double any previous year, indicating strong demand for IMAX content [5]. - The partnership expansion with Wanda Film, China's largest exhibitor, highlights IMAX's importance in driving cinema attendance [5]. Installation and Adoption - The number of new IMAX systems installed has increased significantly, with 47 new systems in 4Q23 and a 12% increase in 1Q24 compared to the previous year [6]. - IMAX has a backlog of 442 systems, representing about 25% of total systems installed, suggesting strong growth potential over the next 2.5 years [8]. Financial Outlook - IMAX is expected to sustain high-single-digit growth through FY27, supported by management guidance and visibility in the number of installations [10]. - The current valuation at 8x forward EBITDA suggests a potential stock value of approximately $23, assuming continued share buybacks [11]. Conclusion - The shift in the cinema industry's value proposition towards premium experiences favors IMAX, creating a positive feedback loop that encourages more studios to produce content for IMAX and more cinemas to install IMAX screens [13].