Consumer discretionary stocks have been getting the side-eye from investors lately, as rising interest rates and concerns about the macroeconomy heighten worries about consumer spending. There are few activities more discretionary than movie-going, which is why it’s no surprise that Imax (IMAX 0.73%) stock fell by more than 11% this week, according to data compiled by S&P Global Market Intelligence.
The big-screen cinema operator might just have an ace up his sleeve, though.
Imax’s slide occurred despite an encouraging bit of continuity in the C-suite. On Monday, it disclosed in a regulatory filing that it had extended longtime CEO Rich Gelfond’s contract through 2025, with his base salary remaining unchanged from the current level. This was particularly welcome, as Imax recently named several new top managers, including Natasha Fernandes as CFO.
The stock’s decline was reversed mildly on Friday. After market hours the previous day, Imax announced that it has acquired Canadian streaming video technology specialist SSIMWAVE. It describes the privately held company as a developer that “enables streaming and broadcast providers to deliver the best possible image on any device for on-demand and live video.”
Imax paid $18.5 million in cash for the acquisition, plus $2.5 million in its stock. It may be obligated to pay up to an additional $4 million if SSIMWAVE hits certain operational and financial milestones.
The newly purchased business has a solid pedigree. According to Imax, SSIMWAVE’s video streaming clients include some of the top names in the entertainment industry, including Walt Disney, Paramount Globaland Warner Bros. Discovery.
As a purveyor of tech-forward filmed entertainment, Imax always has to stay on the cutting edge, and that goes double for the quickly developing streaming segment. However, investors might still be more concerned with people curbing their spending on movie theater tickets, as the company’s fortunes continue to be linked to box office take.
Eric Volkman has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool recommends Warner Bros. Discovery, Inc. and recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.