IMAX: Big Screen Bet

06/26/2015 7:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

The movie industry looks to make more money during the big summer movie season and it depends on getting the highest possible ticket prices from viewers, suggests growth stock expert Mike Cintolo, editor of Cabot Top Ten Trader.

And having a film shown on an IMAX (IMAX) screen is one way to command a premium ticket price.

When IMAX made its last previous appearance in Top Ten back in May 2011, the company had 408 commercial movie screens worldwide. Today, that number is over 950 in 63 countries and there’s a backlog of more than 400 theaters waiting to be converted.

IMAX has been growing its total number of screens at around 20% per year since 2009 and the number of films available to show on those screens has grown at an annual 23%.

The company is thriving as theaters in the newly-opened China market increase rapidly. And investors see great potential for Latin American growth in the near future and growth in India in the longer run.

IMAX began as a maker of film cameras, but has been a constant innovator, offering stadium seating, 3D, brighter projection technology, 12-channel sound, and an array of digital 2D and 3D cameras, thus providing the only end-to-end ultra-widescreen solution on the market today.

Revenue varies from season to season, but the company’s Q1 results showed a 40% jump in earnings on a 29% increase in revenue, the strongest numbers in over a year.

And with blockbusters like Jurassic World, Mission Impossible 5, Hunger Games: Mockingjay Part 2,and Disney’s Star Wars: The Force Awakens on tap for this summer, investors see a bright, wide-screen future for both the technology and the company.

IMAX traded flat from early 2012 (when it traded at $27) through October 2014 (when it dipped to $26). But the stock began to rally on expanded volume early this year, moving out to multi-year highs in January and accelerating rapidly as good revenue and earnings news (and projections) fueled the rally.

IMAX has advanced in 10 of the last 12 weeks and for the last six weeks in a row. A small buy on any weakness could do well and you can average up if the rally continues.

A defensive stop at the stock’s 50-day moving average (now at $38) will give the stock enough room to breathe.

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