IMAX is the best way to play the consumer transition to more expensive and higher quality theatrical experiences — and this weekend’s premiere of Universal ‘s “Oppenheimer” exemplifies why, Wells Fargo said. Analyst Omar Mejias reiterated his overweight rating on the stock. His price target of $25 implies shares could rally 48% from Monday’s close. “IMAX remains our favorite name to play the shifting trend to premium theater experiences,” Mejias said in a note to clients Monday. “This weekend’s Oppenheimer perfectly illustrates this trend.” Despite a softer-than-expected second quarter, IMAX screens should still reach the full-year expectation of $1.1 billion in the global box office, Mejias said. That’s driven in part by the strength of “Oppenheimer,” which drove consumers to IMAX screens over the weekend. Though only making up less than 1% of domestic and global theater screens, Mejias said IMAX screens accounted for around 26% and 15% of the movie’s domestic and international box office, respectively. “Oppenheimer” is considered one-half of the “Barbenheimer” duo. The pairing, which included Warner Bros. “Barbie,” helped drive the fourth highest grossing box office weekend ever, according to Comscore. IMAX’s 2023 box office performance should also get a boost from additions to the second half of the year including “Napoleon” and “Killers of the Flower Moon,” the analyst said. Still, the dual Hollywood strikes have created uncertainty around whether studios will stick to their release schedules. Mejias said he expects the latest “Dune” film to stay in its current timeframe. And if it does move, he noted IMAX could instead show “The Marvels” or “The Hunger Games” prequel. Meanwhile, he said demand for IMAX systems should remain strong through at least the rest of this year. The company had 66 signings through the end of April of this year, a significant improvement over the 47 it had in the same period of 2022. With the Chinese box office activity returning, the company could reach pre-pandemic business levels by 2024, Mejias said. Recent signings are also focused on high-value locations, which he said can signal a growing footprint in attractive markets. IMAX CEO Richard Gelfond said on CNBC’s “Squawk on the Street” Monday that the rising demand for IMAX ties into the trend of people seeking out experiences coming out of the pandemic. He pointed to the craze around Taylor Swift’s tour as another example. “There’s a paradigm shift going on right now,” he said. “After sitting on couches for so long, people want something that’s really different on a global basis.” Mejias isn’t the only one watching IMAX following the release of “Oppenheimer.” B. Riley analyst Eric World said in a note to clients that the company was able to “completely dominate” when it came to opening weekend showings. IMAX is “the best way to play the global exhibition industry recovery,” Wold said in a note to cleints. “We believe the continued over-indexing of IMAX screens in the post-pandemic moviegoing environment provides evidence of a structural improvement of consumer demand toward the format.” Shares of IMAX were slightly lower in trading Tuesday after finishing nearly 3% higher on Monday. The stock has gained more than 15% since 2023 began, but still trades below where it ended 2021. IMAX 5Y mountain IMAX over the last 5 years Disclaimer: Comcast owns NBCUniversal, which is the parent company of both Universal and CNBC. — CNBC’s Michael Bloom, Thomas Rotunno and Sarah Whitten contributed to this report
