By: Elliot Turner
With the Academy Awards last night, it seems only natural that a movie-centric stock/company looks poised to breakout to new long-term highs. Imax (IMAX) is a company that sits in an outstanding fundamental position in order to capitalize on the movement towards 3-d video and entertainment. Many know of Imax for their huge screens and those bulky 3-d glasses that bring action movies, graphics and educational features to a new level of lifelike entertainment. Although there are companies more exclusively in on 3-d itself, Imax’s positioning in the marketplace makes it an important player. To some, Imax is to 3-d as Vaseline is to petroleum jelly or kleenex is to facial tissues.
Avatar‘s success (despite not winning an Oscar last night) propelled 3-d to the forefront of advances in entertainment. Americans had significantly slowed their pace in attending movies because of the high quality home entertainment systems available with HD and surround sound, as well as the surging price of theater tickets. Now, for just a couple dollars more than a standard ticket, people have a real reason to see a movie at a theater where they can experience a whole new style of entertainment that is not available from the comforts of the living room couch.
Some speculated that Avatar would be a “one-hit-wonder,” however, this weekend’s opening for Alice in Wonderland proves otherwise. Imax generated $11.9 million in revenues from Alice this weekend alone, bumping Avatar from the biggest opener slot in Imax 3-d history and putting the company in position for another blockbuster hit.
The biggest negative I see for Imax going forward is the company’s poor debt structure. Typically in this “credit crisis” environment, I avoid companies with such a debt standing; however, considering the growing fundamental catalyst, I believe the company should have a reasonable opportunity to capitalize and restructure that debt into a more favorable balance sheet moving forward. This negative has the opportunity to become a positive catalyst for the stock as the company’s revenue structure and pipeline of new movies improves.
Right now, the technical setup clearly reflects the growing positives on the fundamental landscape. In December, Imax broke out from solid resistance on the monthly chart:
On the daily chart, we now see the formations of an inverted H&S pattern. On a break above $14.50 this stock has little to the left for a long time:
This is exactly the type of confluence between a fundamental catalyst and a technical setup that I like to see.
