IMAX (IMAX): Dennis Slothower’s top stock for 2010
For his top pick for 2010, Dennis Slothower turns to the "big screen" and highlights a company that could benefit from the recently release film, Avatar.
The editor of Stealth Stocks says, "IMAX Corporation (NASDAQ: IMAX) is one of the world’s leading entertainment technology companies, specializing in motion picture technologies and large-format film presentations." Here's the reasoning behind his buy recommendation.
"The company’s principal business consists of large-format digital and film-based theater systems.
"The sale or lease of such systems to, or contribution of such systems under, revenue-sharing arrangements with its customers and the conversion of two-dimensional (2-D) and three-dimensional (3-D) Hollywood feature films for exhibition on such systems around the world.
"IMAX’s theater systems are based on proprietary and patented technology. Its customers that purchase, lease or otherwise acquire their theater systems are theater exhibitors that operate commercial theaters, museums, science centers or destination entertainment sites.
"The company generally does not own IMAX theaters but instead licenses the use of its trademarks along with the sale, lease or contribution of its equipment.
"In 2002, IMAX introduced a technology that can digitally convert live-action 35mm films to its large format at a modest incremental cost while meeting the company’s high standards of image and sound quality.
"In 2003, the company introduced IMAX MPX, a theater system designed specifically for use by commercial multiplex operators.
"The IMAX MPX system, which is highly automated, was designed to reduce the capital and operating costs required to run an IMAX theater, all without sacrificing image and sound quality.
"Avatar, a movie made in 3-D, was just released this Christrmas. Critics are saying that it could be the next The Lord of the Rings, only it uses a new kind of 3-D technology that is expected to revolutionize the movie industry, much as did sound and color did in the last century.
"High expectations are pushing theater chains around the world to invest in this new digital 3-D system. If Avatar is, in fact, a big hit, we’re sure to see many more 3-D action films and many more 3-D theaters, which should increase IMAX’s earnings sustainably."
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