UPDATE, 7:35 AM: IMAX‘s stock price is down about 6% in early trading after Wedbush Securities’ Michael Pachter lowered his earnings estimates, citing disappointing Q3 box office sales. Sony’s Elysium, Warner Bros’ Pacific Rim, and Universal’s Riddick “likely did not perform at the levels we initially expected,” he says this morning. That led him to chop his revenue estimate for the quarter by 9.4% to $58M, with his earnings forecast down 53% to 7 cents per share. But he’s holding firm on his estimates for Q4 until he has a better handle on how audiences will respond to expected hits led by Warner Bros’ Gravity and The Hobbit: The Desolation Of Smaug, and Lionsgate’s The Hunger Games: Catching Fire.
PREVIOUS, WEDNESDAY PM: Today was at least the second day this week that an analyst has questioned the large-screen movie company’s growth prospects — and it contributed to a 4.4% drop in the stock price. Benchmark Company analyst Mike Hickey, who initiated coverage of IMAX today with a “hold” recommendation, warns that domestic cinema growth in 2014 “could prove challenging” with a slate that will include IMAX versions of Fox’s Frankenstein; Sony’s RoboCop; Warner Bros’ 300: Rise Of An Empire, Godzilla, and Edge Of Tomorrow; and Paramount’s Transformers: Age Of Extinction. On Monday Sterne Agee’s Vasily Karasyov raised a similar concern as he lowered his revenue and earnings projections. The per-screen average of IMAX box office sales this year could fall short of expectations, he says, with films that include an IMAX release likely accounting for 38% of the U.S. box office this year, down from 43% in 2012. The problem, looking ahead, is that film franchises based on comic book characters “appear to be at or near the peak,” Karasyov says. Studios have already seized on the most popular characters and “the properties that are left unexploited at this point are unlikely to produce a break-out hit.” Hickey cited additional reasons for concern about IMAX. Ticketbuyers may tire of paying a premium price for the large screen venues — especially if the economy slows. That’s a real possibility in emerging countries including China where IMAX is vigorously building theaters. What’s more, “slowing international demand for 3D experiences could also prove disruptive…as many movie-goers associate IMAX with 3D.” Investors have high expectations for the company: Its stock price has appreciated nearly 43% over the last 12 months.
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