Do you know what’s a classic pastime that almost everybody in every country in the world appreciates? That’s right – a trip to the local movie theater for some good old-fashioned escapism.
That’s why the global movie theater market, which stood at about $68 billion in 2022, is expected to hit $92.4 billion by 2030. As incomes rise across the globe, spending on entertainment also increases – which when coupled with the impressive advancement in movie-making technology – will ensure this industry keeps steadily growing for decades to come.
Now, are those the most “impressive” numbers? Certainly not – but that doesn’t mean that cinema stocks can’t deliver returns worthy of the big screen.
Plus, today’s daily stock pick isn’t just any regular movie theater chain. No, today’s stock pick occupies a very specific and unique niche in the movie theater market – one that gives it unparalleled branding power and a durable competitive moat.
IMAX Corporation (IMAX)
While most movie theaters may have a brand name that at best extends to their domestic markets, the IMAX brand carries with it a global recognition that gives the company a premium positioning in the market.
IMAX’s business model is not to own the IMAX theaters themselves (which would be far too capital intensive) – but simply to lease or sell their proprietary system to the movie theater owners. At the end of March 31, 2023, there are 1,711 IMAX systems globally, which management is confident can hit 3,300 over the long term.
Revenue-wise, IMAX has still yet to recover back to pre-pandemic levels. But therein lies the opportunity. The stock is currently trading at about $19 – about half that of its peak.
Yet, its revenue has been steadily recovering, rising 45% year-on-year in 2022 – substantially ahead of analyst expectations.
The company’s institutional shareholders have also been steadily increasing their stakes over the course of the first quarter of 2023. The majority of analysts have also rated this stock a Buy.
In short, as consumers look to theaters to provide an experience that no home theater setup will ever be able to replicate, IMAX should be able to continue to enhance its competitive position and continue to grow its market share.
To your wealth,
Felix @ Ace of Investing
