Imax Stock Surges as Analyst Touts Cash Strength to Survive Virus Impact

TCL Chinese Theatre Closed March 2020

"We believe Imax can survive for at least two years given its pristine balance sheet," Macquarie Research said as the giant screen exhibitor led by CEO Richard Gelfond saw its shares jump 35 percent in value.

As rival exhibitors burn cash to survive theater closures amid the coronavirus outbreak, Macquarie Research on Thursday said giant screen exhibitor Imax has balance sheet strength and liquidity to ride out the severe industry disruption.

"We believe Imax can survive for at least two years given its pristine balance sheet and superior business model (minimum rent, high margins, low labor)," Macquarie analysts, led by Chad Beynon, wrote in an investors note.

Shares in Imax leapt $2.52, or 35 percent, to $9.72 in morning trading after being beaten down in recent weeks as major movie chains shutter theaters for social distancing. Imax has touted its financial discipline in recent years heading into the coronavirus crisis, with the company currently having nearly $100 million in cash, virtually no debt and a $300 million revolver at hand.

And unlike its exhibition partners as physical theater operators, Imax doesn't have real estate costs to carry on its balance sheet. North American exhibitors in recent years have invested heavily in luxury loungers, bars and restaurants, and screen and sound improvements to keep moviegoers headed to the multiplex.

As it did a wider cash burn analysis on the movie exhibition sector, Macquarie pointed to a "clean balance sheet" at Cinemark positioning that chain well to also weather the coronavirus outbreak, "particularly if the (theater) closures last for months."

Beynon forecast AMC Theatres, despite its cash burn, will not go out of business due to the virus outbreak closures. "With a sub $300 million market cap, we think AMC has the ability to divest operations, reduce capex and salvage the company well enough to participate in the returns from all the money they've spent during the last five years," the Macquarie note stated.