What's the Deal with Imax?

It’s been a couple of months since I have mentioned Imax (IMAX, $7.38, down $0.11) so I thought I’d give a quick update for those who may have read the piece in our article section of OptionsMentoring.com. At the time, I was “publicly” debating if the stock was a better buy than a longer-term option.

The company reported earnings last week and it wasn’t pretty. Imax showed a net loss of $0.25/ share as revenue fell 12% to $23.5 million for the quarter. The Street was expecting a much smaller loss to the tune of $0.14/ share. Needless to say, I don’t think they saw that one coming. However, the stock has traded higher based on Imax’s future prospects.

I told you how Imax was going digital this summer and the company recently scored a couple of financing deals to help with the roll-out. Although Imax posted a dismal quarter it’s clear investors are looking at the big picture (no pun intended).

Imax was trading for $6.50 when I shared my thoughts and it closed yesterday nearly a buck higher. Quick math gives us about a 15% return if the stock would have been purchased. The September 7.50 calls (IMQIU, $1.05, unchanged) were going for 75 cents so they have risen 33%.

The stock broke through its 20 and 50-day moving averages before the company announced earnings and has held steady since. This is a pretty bullish sign. It’s still too early to tell if either of the aforementioned plays will continue higher from here on out but from the looks of things Imax could be sitting at new 52-week highs by the time summer gets here.

(To read the original write-up on Imax click here).

Rick Rouse
Rick@OptionsMentoring.com

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