IMAX Swingwave Warnings

As home theaters and streaming options become more adopted I, regrettably, foresee an ugly future for the theater industry.  That said, the entertainment technology company IMAX has recently been posting higher earnings while diligently expanding to overseas markets.  Is this stock worthy of an investment or is your money better spent at the concessions counter?  Let’s examine their most recent globalization contracts for more information.

Rick Aristotle Munarriz from the fool.com writes that “IMAX now has contracts in place to have 45 theaters screening its super-sized format open in Russia by 2014. Russia has become IMAX’s third-largest market outside of the United States and China.”  Also, in respects to China, it remains to be seen if people are willing to adopt streaming content as readily as those in the United States.

That said, I’m still concerned about the future success of 3D cinema.  As you can tell from the below chart fewer and fewer people are choosing to see movies in 3D.  And with 3D being a major selling point for the IMAX “experience” one could wonder how much a continued decreased audience interest would hurt IMAX sales.

Finally, let’s examine the SwamiChart for more information.  What I love about this chart is that you’re warned of a possible peak in prices around June 8th thanks to the Swami SwingWave indicator.  Remember that orange represents a “peaking” signal where as blue indicates a possible “valley”.  Also, you were warned of another possible dip a couple of bars before today’s massive retracement.

In sum, I wouldn’t recommend investing in IMAX for the previously described fundamental reasoning.  It’s great that the company is expanding to Russia but I’ll need to see proven success (as is the case with China) before raising any valuation.

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4 Responses to IMAX Swingwave Warnings

  1. Jardon says:

    Last Airbender and Despicable Me did not play in IMAX theatres, which explains the dramatic drop in revenue for those films.

    Finally, any early IMAX investor will tell you the company had growth coming its way well before 3D hit the mainstream. The fact is that 2D presentations of films in IMAX create an experience that you cannot get from a standard stadium screen. IMAX captures the moviegoer and gets them to “experience” the movie, rather than just view it. You will see over time that IMAX theatres will be essential for any movie house interested in having consistent cash flow. I have heard talks that we might see IMAX only theatre soons, like the ones in museums. Why not? Less real estate and solid cash flow.

  2. strepper says:

    Great comment. I think you’re right that I over-weighted 3D’s impact and association with IMAX. Also, I like your idea that we may someday see IMAX only theaters. They really do offer something you can’t get with your home theater. Though that’s really condensing the type of movies that are available to public viewing (i.e.- I can’t imagine a film like “Lost in Translation” being shown in an IMAX).

  3. Bob Slepicka says:

    You have to factor an age demographic in the equation. 3D is not a youth oriented medium. It is a demographic of the above 16 years old. Parents have a problem keeping glasses on pre-teens and do not want to pay the extra money to play with all the hassle. That’s why action oriented films like TDK, Avatar, Alice, Transformers and Harry Potter will play well in IMAX and cartoons don’t.

    • Jardon says:

      Bob, good point, but keep in mind that 3D is relatively new. Kids 5-15 can be pretty bright once they learn how something operates. Give it time, they’ll get it.

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