Wedbush Concerned About IMAX Corporation Over Netflix, Inc. Deal

Wedbush maintained a Neutral rating and $28 price target on IMAX Corporation (USA) IMAX in a note issued Wednesday.

Netflix announced a deal on Tuesday to exclusively debut "Crouching Tiger, Hidden Dragon: The Green Legend", the sequel to the 2000 release "Crouching Tiger, Hidden Dragon." It will be shown exclusively and simultaneously on Netflix, Inc. NFLX and in select global IMAX theaters on August 28, 2015, according to analysts led by Michael Pachter.

The analysts expressed concern because it "has become clear that IMAX did not reach any agreements with its partner theaters prior to making the Legend deal." Netflix may be seen as a threat to the traditional model of distribution by theater owners.

According to the analysts. "Regal, Cinemark, Carmike and AMC each issued statements to select press outlets that they were not happy with a debut of the film on Netflix, and stated that they would not show the film on their respective IMAX screens."

Theaters have the right to decide what films are shown on IMAX screens. As a result of the tension between theater owners and IMAX, the analysts feel "boycott of Legend could significantly impact IMAX profits from the deal."

The Wedbush price target reflects approximately a 28x multiple on its FY 2015 EPS estimate.

IMAX Corporation closed at $26.57 on Wednesday.