IMAX Stock (IMAX) Falls on China Concerns Despite Posting Strong Q1 Growth

Business Insider

25-04-2025

IMAX Corporation (IMAX) delivered impressive financial results for the first quarter of 2025, with revenue climbing 10% to $86.7 million, surpassing analyst expectations of $84.23 million. The cinema technology company also reported a substantial 52% increase in net income, reaching $8.2 million compared to $5.4 million in the same period last year.
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Despite these positive results, IMAX stock experienced mixed reactions. After initially trading up 4% to $25.05 following the earnings release, the share price had declined to $23.29 by the end of the day following the release, dropping 3.36%. This pullback suggests some investor uncertainty about future growth prospects.
Financial Highlights
For the quarter, IMAX reported strong performance driven by record global box office receipts of $298 million, up 12% year-over-year, with particularly robust results from China. Technology Products and Services revenue, which includes proceeds from sales, leases, and maintenance of IMAX theater systems, saw a 17% increase to $51 million. The company installed 21 new theater systems during the quarter, representing a 40% increase from the 15 installations in Q1 2024.
Content Solutions revenue increased slightly to $34 million, benefiting from successful releases including 'Captain America: Brave New World' and Ryan Coogler's 'Sinners,' which exceeded box office expectations during its opening weekend.
The company's adjusted EBITDA grew 15% to $37 million, reflecting operational efficiency amid the ongoing theater industry recovery. Non-GAAP EPS of $0.13 beat expectations by $0.02.
China is a Dual-Edged Sword
The company's performance in China was particularly noteworthy, with the Chinese New Year holiday generating $182 million in box office revenue. The animated film 'Ne Zha 2' became IMAX's highest-grossing local language animated release in China, earning over $164 million on IMAX screens.
However, recent announcements from the China Film Administration about plans to 'moderately reduce' Hollywood film imports in response to U.S. tariffs have raised investor concerns. CEO Rich Gelfond expressed confidence that the reductions would primarily affect smaller budget films with limited box office potential rather than the blockbuster tentpoles that drive IMAX's business. He noted that Hollywood studios expect major releases with top directors and stars to continue gaining access to the Chinese market.
Looking ahead, the company has a strong lineup of films shot in its premium format, including 'Thunderbolts,' 'Mission: Impossible — The Final Reckoning,' and 'The Fantastic Four.'
Analysts Remain Mostly Constructive
Analysts following the company have been bullish on the stock. However, before the earnings report, JPMorgan lowered the firm's price target to $26 (from $27) while maintaining a Neutral rating on the shares, citing risks related to China and exhibitor capex amid the trade war.
IMAX is rated a Strong Buy overall, based on the most recent recommendations of eight analysts. The average price target for IMAX stock is $31.88, which represents a potential upside of 36.88% from current levels.