"Avatar" boosting Imax shares

TORONTO – As "Avatar" pushes Imax Corp stock to all-time highs, most analysts see even more upside thanks to a changed business model and more 3D crowd-pullers on more screens this year.

"It's not simply 'Avatar'; Imax is very well positioned to benefit from a number of blockbusters to be released in the next 12 months," said Piper Jaffray analyst James Marsh, who has an "overweight" rating and $16 price target on the stock.

Imax traded at $12.91 on the Nasdaq on Friday, down 3.6 percent on the day in a weaker market, and off its record high of $14.60 set on January 6.

Gabelli & Co. analyst Brett Harris, who has a "buy" on Imax shares and thinks it will be worth $18 next year, pointed out that Imax's $100 million-plus contribution to "Avatar's" $1.6 billion worldwide haul exceeds its share of screens.

Harris believes the stock is trading higher not only on the success of a single movie but the company's business plan and ability to pick good movies.

But some skeptics see "Avatar 3D" as a one-off -- an outlier that dominates box office but leaves the broader exhibition industry unchanged, at least for now.

"While 'Avatar' is likely a watershed for digital and 3-D technology, it does not tell us that the underlying economics of the film business have changed," Barclays Capital analysts Anthony DiClemente and George Hawkey wrote in a recent report.

There's also concern that the Imax brand might suffer if moviegoers who were dazzled by "Avatar 3D" and its immersive effects are disappointed viewing future 3D titles on its giant screens.

Merriman Curhan Ford analyst Eric Wold has a "neutral" rating on Imax, partly "given the planned accelerated rollout for Cinemark XD," a large-format digital initiative that competes with Imax. But he is bullish on the likely Imax hauls for "The Twilight Saga: Eclipse" and other titles.

The 3D pipeline at Imax this year also includes DreamWorks Animation's "How to Train Your Dragon" and "Shrek Forever After" and Disney's "Tron Legacy 3" and "Toy Story 3."

A big test for Imax will be how audiences greet Tim Burton's "Alice in Wonderland," which launches March 5; the Disney title will be Imax's first post-"Avatar" 3D offering.

Imax CEO Rich Gelfond insists his business model is not dependent on "Avatar" -- or, for that matter, any other single blockbuster that might land on his screens.

"I don't think every film has to be as good as 'Avatar' for Imax to perform well," he said. "That's a bar that doesn't have to be met, nor will it be met."

Gelfond sees the recent run-up in Imax stock as less a short-term rally than the result of a long and hard slog to anchor the Toronto-based exhibitor in commercial entertainment, reduce overall debt and restore profitability.

"The Imax story is just beginning to unfold," he said. "Imax has just come through a transition, and the brightest part of our future is still to come."