How Godzilla’s Box Office Success Could Offer Your Portfolio the Same
By George Leong for Daily Gains Letter |
Godzilla (2014) is running wild at the box office, as this classic B-movie remake has delivered a record opening weekend for specialized movie theater operator IMAX Corporation (NYSE/IMAX).
If you have ever had the IMAX experience, you likely agree that Godzilla was probably as life-like as possible through the big-screen format of an IMAX theater, surrounded by about 12,000 watts of mind-blowing sound via a network of more than 40 speakers.
The screening of major Hollywood blockbusters on IMAX screens has been a big winner for the company and an excellent investment opportunity. IMAX has shown such major movies as The Hunger Games series, The Avengers, the newest Batman series, and The Hobbit: An Unexpected Journey.
Yet the appeal of IMAX has not only been its expansion in North America, but its ability to grow rapidly worldwide in places such as Western Europe, Japan, China, and Russia, which makes the stock a good investment opportunity. As of March 31, 2014, there were 840 IMAX theater systems installed in 57 countries worldwide.
The expansion into China is especially intriguing as an investment opportunity. With more than 1.3 billion people and the ongoing debut of Hollywood films in China, the investment opportunity is tremendous. At this time, there are about 150 IMAX theater systems in the country with contracts to open another 400 or so. In fact, if IMAX catches on, we could easily see hundreds more theater systems installed.
Fundamentally, the company reported higher annual revenue growth in 2009, 2010, 2012, and 2013. Revenues are estimated to grow 5.7% to $304.46 million in 2014, followed by 15.2% to $350.64 million in 2015, according to Thomson Financial estimates.
Should IMAX steadily record higher revenue growth, the stock will continue to deliver and provide a sound investment opportunity.
The company is profitable, but its earnings growth needs to be consistent. IMAX is expected to ramp up earnings to $0.90 per diluted share in 2014, followed by $1.18 per diluted share in 2015, according to Thomson Financial consensus estimates.
The chart of IMAX shows some hesitancy around $31.00. A move below its 50-day moving average (MA) could be an investment opportunity, based on my technical analysis.
Chart courtesy of www.StockCharts.com
The major short selling on the stock is a plus, especially if IMAX rallies. The shorts accounted for about 31.4% of the float, or 15.99 million shares shorted, as of April 30, 2014, according to Thomson Financial. An upward move in the stock could drive short sellers to the exits and push the stock price higher, representing a good investment opportunity.
You can either buy IMAX outright or leverage your investment opportunity via the use of call options.
Tags: call options, China, earnings growth, Europe, investment opportunity, revenue growth, short selling, technical analysis
