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IMAX Expands Presence in China with Multiple Partnerships

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IMAX (IMAX - Free Report) recently extended its partnership with Wanying Cinema Line to open 14 more IMAX theaters bringing the total to 15. The theaters will feature the company’s latest laser technology.

Notably, both the parties signed a prior agreement to open an IMAX theater, which opened in March this year.

Wanying Cinema Line, a subsidiary of China Resources Land, one of the biggest state-owned commercial developers, will install IMAX theaters in MIXCINE multiplexes, its new luxury shopping sites, most of which are placed in tier one and tier two cities.

Two theaters will open on Sep 15 in Taiyuan and Chongqing. The others are expected to be operational by 2021.

China Expansion: A Key Catalyst

IMAX continues to expand its presence in China by opening more theaters as well as being part of the local title releases. Notably, the company currently has a total of 900 contracted theaters in Greater China.

Greater China is IMAX’s second-largest market, with approximately 24% of overall revenues as of second-quarter 2018.

The company’s efforts to further expand its presence in China are likely to lead to increased revenue contribution from the region and thereby top-line growth.

Major Hollywood title releases in China also contribute significantly to IMAX’s revenues. Marvel Studios' Avengers: Infinity War, the first movie to be completely filmed with IMAX cameras generated $145 million, as of the last reported quarter, including $43 million from China alone. It is company’s biggest grossing title ever.

IMAX is improving its relationship with ticketing platforms in China to improve its presence in the market, which will eventually drive audience.

Intensifying Competition to Hurt

Theater owners like IMAX are facing significant competition from streaming service providers like Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) , and Hulu. These services have been successful in attracting the audience with award-winning content. As a result, footfall has declined in theaters, hurting top-line growth.

Moreover, Amazon’s plan to acquire Landmark Theatres, which has more than 50 theaters in the United States, is likely to disrupt IMAX’s dominant position in the market.
 
Nevertheless, IMAX is expected to benefit from film studios’ increasing emphasis on releasing franchise content and consumers’ growing desire to experience this content in differentiated ways. Growing number of blockbuster movies like Avengers: Infinity War and Incredibles 2 is a key catalyst for IMAX.

Zacks Rank & Other Stock to Consider

Currently, IMAX carries a Zacks Rank #3 (Hold).

A better-ranked stock that can be considered in the broader consumer discretionary sector is Sony Corp. sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Sony is currently pegged at 7.1%.

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