Over the past week and a half, shares of IMAX (NASDAQ: IMAX) failed to take note that the broader market wanted to pullback at the moment. Yesterday, IMAX surged to new highs unseen since the dot.com era, riding the coattails of “extremely robust” advance sales to tickets of Harry Potter and the Deathly Hollows. This move continues the impressive rally that started after the company reported outstanding third quarter earnings.
Following third quarter earnings, I wondered out loud whether IMAX is a Fad, Trend or the Next Big Thing and this latest Harry Potter release provides us with a new, useful piece of information to the puzzle. Clearly after the third quarter I felt optimistic about the company cementing its status in the cinema landscape. However, for the most part, the narrative about IMAX has centered around 3d as the one driving force behind the company’s rapid ascent. What exactly is this new information I’m alluding to? Well Harry Potter will open in 365 IMAX theaters and has already forged new record highs in advance sales for the company despite not even being a 3d movie.
Yep, you read that right. Harry Potter tickets are selling like hot cakes, yet the movie is a 2d rather than 3d offering and herein lies the significance to IMAX today. IMAX stock isn’t the only element of the company reaching new levels, so too is its market positioning. For the third quarter, the company’s most successful release in theaters was Inception, a sci-fi 2d thriller. On the earnings conference call, CEO Richard Gelfond offered the following observation: “The performance of Inception demonstrated how our fans seek out IMAX because it is the best way to experience a movie, whether in 2D or 3D” and with a 2d Harry Potter release again making waves, the significance should not be lost on us investors.
IMAX is now way more than “just” a 3d story. We’ve had digital surround sound for years now to the point where many have that luxury at home. Same story with widescreen films now that HDTVs are ubiquitous across home entertainment systems. Now IMAX makes the in-theater experience uniquely different and inspires people to leave the comfort of the couch for a public form of entertainment on a gigantic screen with a stunning visual element unobtainable anywhere else. The continued success of IMAX movies in both 2d and 3d is now encouraging theater companies to upgrade their venues to accommodate the dynamically changing entertainment landscape as evidenced by the rapid acceleration in IMAX theater installation backlog.
So while to many this latest Harry Potter release, the last (well half of the last) in a monumental series, marks the dawn of an era, to IMAX this release marks the company’s next step into mainstream media.
Disclosure: Long IMAX