Buying IMAX might be the best way to invest in the movie industry, Jim Cramer says

IMAX is positioned as a compelling investment within the struggling movie exhibition sector, attributed to its asset-light business model of selling/leasing theater systems rather than direct operation. The company reported its strongest first quarter ever with over $300 million in global box office revenue and projects a record $1.2 billion for the full year, fueled by robust international expansion, increasing local language film dominance, and strategic content partnerships with major streamers like Netflix and Apple. This unique positioning and strong growth trajectory suggest significant upside potential, despite the stock's current valuation, ahead of its anticipated quarterly report.

Analysis

IMAX is positioned as a differentiated asset within the movie exhibition industry due to its distinct business model, which insulates it from the direct operational struggles of theater chains. Instead of operating theaters, IMAX functions as a technology and experience partner, selling or leasing its proprietary systems to operators like AMC and earning recurring revenue from maintenance. This model is validated by strong demand, with the company signing agreements for over 100 new and upgraded systems year-to-date, tracking well against the 130 total signed in all of 2024. Financially, the company reported its best-ever first quarter with over $300 million in global box office revenue and has reaffirmed guidance for a record $1.2 billion in receipts for the current year. Key growth drivers include significant international expansion, particularly with local language films which are projected to constitute 68% of its global box office by 2025, up from 12% in 2019. Furthermore, IMAX has effectively mitigated the threat from streaming services by forming strategic partnerships, such as exclusive theatrical windows for Netflix's "Narnia" and Apple's "F1: The Movie," turning potential competitors into lucrative partners. While the stock is noted as "not exactly cheap" and faces high Wall Street expectations for its upcoming quarterly report, its fundamental momentum and unique market position present a compelling growth narrative.

Key Decisions for Investors

• Investors seeking exposure to the movie industry could consider IMAX a more resilient investment than traditional theater operators, given its asset-light business model and diversified revenue from system sales, maintenance, and premium content partnerships.
• Be mindful of the upcoming quarterly earnings release, as the stock is described as 'not exactly cheap' and high Wall Street expectations could lead to significant price volatility.
• A prudent approach could involve initiating a small position to gain exposure to the company's growth story while reserving capital to potentially buy on any weakness following the earnings report.