IMAX Has a Lot to Prove on Feb. 24

By Markets Fool.com

Shares of multiplex supersizer IMAX soared 17% last week, fueled by a record February showing for Deadpool ticket sales, renewed appetite for growth stocks, and the general uptick in moviegoers. Last week's pop can also be seen as a bounce, as the stock had fallen in each of the three previous months, shedding 19% of its value along the way.

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With the stock showing signs of life again, it's fitting that IMAX will be pulling back on the theater screen curtain in two days, revealing fresh financials. IMAX will be reporting results for the fourth quarter after Wednesday's market close, a period that should be pretty tantalizing given the bar-raising success ofStar Wars: The Force Awakens.CEO Richard Gelfond will also bepresenting at the Jefferies 2016 Media and Communications Conference tomorrow morning, giving the stock back-to-back days to move on new announcements or developments.

We know what Wall Street's expecting on Wednesday. Analysts see revenue and earnings per share climbing 13% and 29%, respectively, over what it rang up during the prior year's holiday quarter. Double-digit growth and widening profit margins are always impressive, but it would actually represent a deceleration from IMAX's pace set earlier in the year. Revenue through the first nine months of 2015 had soared 35% with profitability nearly doubling.

There were 1,008 IMAX screens in operation as of the end of the third quarter, and a lot of the growth for the enabler of senses-heightening theatrical presentations is coming from overseas. Just this morning, it announced a deal for additional screens in France and Switzerland. China has become its largest market outside of North America, now accounting for more than half of the order backlog and a quarter of the existing screens. Things are going so well in the world's most populous nation that IMAX took its Chinese subsidiary -- IMAX China -- public a few months ago in Hong Kong. It retains a 70% stake in the business.

It all comes together to flesh out an unlikely renaissance for multiplex operators. Movie theaters were left for dead a few years ago. Everyone assumed that falling prices of high-def TVs and improving resolution of those screens would turn exhibitors into this generation's buggy whip sellers. The booming popularity of streaming television -- giving folks a smorgasbord of video content to consume at any time -- would also make the corner movie house a thing of the past.

Things haven't played out that way. We saw Star Wars: The Force Awakens shatter box office records this holiday season, and Deadpool just set a new high-water mark for February openings. Hollywood studio executives and movie theater operators have turned to IMAX as a way to charge a few more bucks per screening, and consumers aren't flinching at the value proposition. After all, as great as home theater technology has evolved, it won't duplicate the IMAX experience -- and movie studios are in no rush to push theatrical releases into the home market until the last juice has been milked at the local multiplex.

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This brings us back to Wednesday's feature presentation. IMAX reports, and after beating Wall Street's profit targets in three of the past four quarters and with analysts conservatively forecasting decelerating growth through 2016, there is plenty of room for an upside surprise. Even after last week's pop, the stock is still trading lower year to date. That can change with a strong conference presentation on Tuesday and a blowout quarterly report on Wednesday.

The article IMAX Has a Lot to Prove on Feb. 24 originally appeared on Fool.com.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends IMAX. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.