The price target increase was due to the company's announcement yesterday that its subsidiary, IMAX China, filed an application for an IPO in Hong Kong, according to the analyst note. This announcement came earlier than analysts had expected.
The IPO could occur over the next two to four months, according to public documents related to the Hong Kong Stock Exchange, analysts said.
However, there are a few remaining questions to be answered. It is uncertain as to the exact share IMAX intends to divest but suspect it is very much linked to the final valuations, analysts noted. Second, the issue of repatriating cash is also unclear at this stage, and last, the issue of use of proceeds is also uncertain.
Shares of IMAX are falling by 1.15% to $39.54 in Friday's early morning trading session.
Separately, TheStreet Ratings team rates IMAX CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate IMAX CORP (IMAX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 3.8%. Since the same quarter one year prior, revenues rose by 29.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- IMAX's debt-to-equity ratio is very low at 0.04 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- The gross profit margin for IMAX CORP is rather high; currently it is at 66.37%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, IMAX's net profit margin of 0.62% significantly trails the industry average.
- This stock has managed to rise its share value by 57.32% over the past twelve months. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- IMAX CORP has shown no change in earnings for its most recently reported quarter when compared with the same quarter a year earlier. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, IMAX CORP reported lower earnings of $0.56 versus $0.63 in the prior year. This year, the market expects an improvement in earnings ($1.16 versus $0.56).
- You can view the full analysis from the report here: IMAX Ratings Report