Shares of IMAX (NYSE: IMAX) popped today, closing with gains of 14%, after getting a bullish initiation from Wall Street. Goldman Sachs kicked off coverage of the media technology company with a buy rating alongside a $14 price target, representing another 9% upside from today's close.
Analyst Michael Ng suggests that IMAX's strategy of focusing heavily on big-budget blockbuster films will position the company well for the theater industry's recovery. In contrast, smaller movies are "more susceptible to competition from alternative distribution platforms," the analyst wrote in a research note to investors. Movie theaters have been hit hard by the COVID-19 pandemic, as many have been forced to close to comply with social-distancing guidelines.
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At the same time, the analyst believes that IMAX has sufficient liquidity to weather the crisis. IMAX finished the first quarter with $352.3 million in cash on its balance sheet after drawing from its revolver, which is now fully tapped. Meanwhile, the company is attempting to implement various other cost cuts to help cope with revenue getting cut in half.
Looking farther out, Goldman is optimistic about the robust lineup of major movie releases scheduled for 2021, which will include three titles in Disney's popular Marvel Cinematic Universe (MCU), a new The Batman reboot, and new entries into megafranchises like Comcast's Fast & Furious and Jurassic World. Disney is also set to release Avatar 2 next year following its acquisition of Fox media assets last year. The original Avatar from 2009 was the highest-grossing IMAX film of all time.
"In the back half of 2020 and into 2021, we will participate in a formidable content pipeline with which to relaunch the theatrical business in earnest," IMAX CEO Richard Gelfond said on the last earnings call.
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