Insights

Here’s Why Imax Stock Recovered From Today’s Early Drop

What happened

Shares of high-end movie theater chain Imax (NYSE: IMAX) dropped on Friday morning after the company announced financial results for the second quarter of 2022. Imax stock was down as much as 13% earlier in the day. However, it climbed back and was only down 4% by the time the market closed. Here’s what happened.

So what

In Q2, Imax generated revenue of $74 million, up a whopping 45% year over year. This is because the global box office continues to climb its way back from the pandemic shutdown. However, it’s important to note that Imax’s market share in the U.S. is currently at 5.1% compared to a market share of 4.4%, which is a good sign.

Imax’s gross margin expanded in Q2 to 59.5% compared to 50.2% in the same quarter last year, thanks to more robust sales. However, the company’s net profit fell short of expectations. It had a net loss of $2.9 million. However, that was a marked improvement from last year’s $9.2 million second-quarter loss.

Now what

As you can see, Imax’s results were a mixed bag and I believe that’s why the stock’s performance was also a mixed bag today. Investors were undoubtedly disappointed the company’s profits weren’t better, especially given the strong slate of movies coming out right now. That said, Imax’s increased market share is a wonderful sign when considering the business’s long-term prospects.

Of final note is that Imax repurchased 2.7 million shares in Q2. With roughly 57.9 million diluted shares still, this buyback was fairly substantial. If the company can actually get back to consistently positive cash flow, it’s possible management will keep repurchasing shares and boosting shareholder value.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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