is poised to rally ahead of this summer's film season.
Summer is an important time of year for filmmakers. Though
brought swarms of viewers last spring, summer was the top season
at the box office.
Dark Knight Rises
were last year's standouts, grossing $623 million and $448
Hollywood is hoping for the same type of success from such films
Iron Man 3
Star Trek Into Darkness
this summer. Though film studios are sure to profit from some of
these blockbusters, IMAX should see substantial gains, too.
IMAX operates specialized movie theatres, sells projection
731 theatres in 53 countries. The financial expectations are
lofty as IMAX heads into an important time of the year. Analysts
expect sales to grow 9.6% to $311 million and EPS to increase 23%
to $0.99 this year.
Given the summer film hype, it's no wonder that the shares are at
a critical juncture. The stock has been trapped in a range
between $18 and $26 (blue lines). In fact, the rise from December
to March looked the same in both 2012 and 2013.
However, with an improved fundamental outlook and the potential
for massive blockbuster hits, IMAX could burst past $26 this time
around as opposed to falling all the way back to $18.
This chart shows the price of
shares along with an important resistance level to
One of the biggest problems last March for the stock was that it
had already rallied from $13 in October. So investors wisely
booked 100% gains near $26 in February and March.
However, this year is different because the shares bottomed near
$20 in October. Investors should be more patient this time and
less willing to take gains near $26. This lack of selling
pressure may result in a breakout that has eluded the shares for
a year. Such a breakout would have the potential to take IMAX to
$32 very quickly.
I've taken a small position ahead of the breakout. My plan is to
add more once $26 is firmly broken. Though I'll be looking to
cash some gains near $32, I wouldn't be surprised to see the
stock hit $36 with strong summer box office numbers.
Equities mentioned in this article: IMAX
Positions held in companies mentioned above: