IMAX (IMAX) is set to report its fiscal second quarter earnings on Thursday after market close.
A healthy summer box office season could help IMAX deliver strong top-line growth, yet COVID-19 lockdowns in China threaten to weigh on profits.
Here’s what Wall Street expects, according to Bloomberg consensus estimates:
“Doctor Strange in the Multiverse of Madness,” “Top Gun: Maverick” and “Jurassic World: Dominion” all saw incredibly strong debuts in the second quarter — an encouraging sign for investors as top-performing blockbusters typically serve as the core of IMAX’s business.
In April, the entertainment technology company saw total global box office revenues surge $173.2 million (a 57% year-over-year increase) due to the success of “The Batman” and post-holiday showings of “Spider-Man: No Way Home.”
“There’s just no doubt in my mind that movies are open for business,” IMAX CEO Richard Gelfond told Yahoo Finance in June following “Maverick’s” record-breaking opening weekend.
IMAX screens accounted for 14% of “Maverick’s” $160.5 million domestic opener and about 8.5% of the $300 million international haul after generating a whopping $32.5 million in ticket sales (the company’s best global four-day Memorial Day Weekend opening ever.)
China lockdowns to weigh on IMAX Q2 earnings
Last month, Beijing and Shanghai — key markets for the international box office — announced it would start to reopen after about two months of intense lockdowns that forced citizens to remain indoors.
The second quarter will likely suffer the brunt of those lockdowns as most theaters in the region remained shuttered (only 65% of IMAX screens were operating in the country at the end of Q1.)
China receipts fell 46% in the quarter, contributing a mere 11% to the global IMAX box office total of $247.7 million. The positive? That amount represents a year-over-year increase of 128%, underscoring the theatrical comeback.
Looking ahead, investors will want more clarity on China re-openings amid an increase of COVID-19 case counts.
Coupled with the possibility of more lockdowns overseas, Bloomberg Intelligence noted that other risks include an impending recession (which could derail the number of new theater installations), as well as a slowdown in second-half theatrical releases.
‘For quality, people will pay up’
As consumers continue to battle inflation, IMAX is confident that a downturn won’t sour demand.
Gelfond revealed to Yahoo Finance that, although IMAX tickets sell at a premium, the company’s market share “has been going up” since the start of the pandemic.
IMAX captured a record 4.7% of the domestic box office in the first quarter, a sizable increase compared to the 4.4% market share it held for full year 2021 and the 3% share it maintained for first quarter 2019 (a record-breaking year for the company.)
“For quality, people will pay up,” the CEO stated, noting how consumers are still willing to spend on other forms of entertainment like concerts and sporting events despite the current inflationary environment.
“People just spent so much time sitting on their couch that, if they get something really special, like IMAX, they’re going to be happy to pay more for it.”
Rosenblatt Securities and B. Riley Financial recently reiterated their Buy ratings on the stock, setting respective price targets at $25 a share.
IMAX shares, although down roughly 10% year-to-date, are currently trading at about $17, suggesting potential upside of more than 45%.
Alexandra is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com
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