Netflix Concerns Overblown? The Case For Imax Corporation

Written by Matt Hogan, Finbox

While technology companies and their accompanying disruption are legitimate concerns for nearly every industry, investors often carry these fears to excess.

Over-the-top media providers like Netflix have certainly made their presence felt in the entertainment industry. However, premium large-format provider Imax’s box office figures have bucked the overall declining box office trend.

Imax shares appear to be a victim of excessive negative sector sentiment while finbox.io models show nearly 30% upside.

“Legitimate Concerns…Carried to Excess”

With the continued rise in popularity of Netflix (NasdaqGS: NFLX), Hulu, and other disruptive technology companies, you may have found yourself not taking quite as many trips to the local theater. So when you come across movie-related stocks, your eyes may quickly glaze over.

With declining attendance figures, this is certainly understandable. However, it may be a bit foolhardy in the case of Imax Corporation (NYSE: IMAX). For one, while total U.S. box office numbers were down 14% YoY in the third quarter, Imax’s domestic box office was up 18%.

The negative stigma stemming from disruptive technologies is a theme that renowned value investor Seth Klarman of Baupost Group touched upon in his letter to shareholders last month:

“On the other hand, Baupost is finding value among some firms attacked by the likes of Amazon. ‘Increasing technological disruption is already pushing some securities well below our assessment of underlying value,’ writes Mr. Klarman, ‘as legitimate concerns are, in some cases, carried to excess.’

As an example, he cites department stores: ‘Even for Macy’s, the correct price today is not zero,’ says the letter. ‘Macy’s owns valuable real-estate assets, and there may be ways to navigate through the current environment while salvaging some value for shareholders.’