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Imax Could Post Strong 2021 Returns

By:
Alan Farley
Updated: Dec 29, 2020, 14:59 UTC

The stock was pummeled in the first half of 2020, with movie production shut down and theaters ordered to close.

IMAX

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Imax Inc. (IMAX) is trading at a 10-month high on Tuesday after an analyst upgrade. The stock was pummeled in the first half of 2020, with movie production shut down and theaters ordered to close to prevent the transmission of COVID-19. Many theaters have now reopened with reduced capacity and traffic has been encouraging, with “Wonder Woman 1984” booking a higher-than-expected $16.7 million last weekend, even though it was released on HBOMax at the same time.

Well-Positioned Recovery Play

Many theaters will close their doors permanently before the virus runs its course but Imax is well-positioned as a recovery play, attracting unexpectedly large audiences during the disappointing “Tenet” release in September. In addition, the company won’t suffer too badly from the paradigm shift into streaming services, with moviegoers showing a willingness to see big budget blockbusters on their high tech screens, regardless of other options.

Riley Securities analyst Eric Wold raised his price target to $26 on Tuesday morning, noting “positive underlying demand trends we are seeing within the industry, along with our view of IMAX’s improving position, provide a rationale to raise our price target. We are comfortable increasing our target EBITDA and would not be surprised if the $26 price target proved to be conservative as we move through 2021”.

Wall Street and Technical Outlook

Only four Wall Street analysts cover Imax, yielding a ‘Strong Buy’ rating based upon 3 ‘Buy’ and 1 ‘Hold’ recommendation. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $14 to a Street-high $26 while the stock is set to open Tuesday’s U.S. session about $1 below the median $19 target. This mid-range placement should allow the macro environment to dictate price movement.

The stock posted an all-time high at 43.80 in 2015 and entered a decline that found support at 17.58 in the third quarter of 2018. Bearish price action broke that trading floor in March 2020, dumping Imax to an 11-year low. Steady gains since that time have now reached new resistance, raising odds for a reversal. However, accumulation readings have lifted to three-year highs, offering a golden opportunity for a low-odds breakout that sets off a wave of strong buy signals.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

About the Author

Alan Farley is the best-selling author of ‘The Master Swing Trader’ and market professional since the 1990s, with expertise in balance sheets, technical analysis, price action (tape reading), and broker performance.

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