Time to cash out this ‘American Sniper’ stock

Published Thu, Feb 5 20153:42 PM EST

After a nearly 30 percent run over the last 12 months on the back of the runaway success of the "American Sniper" blockbuster, it's time to sell shares of IMAX, according to one Wall Street analyst's comments Thursday. The presenter of super-size screening experiences was downgraded to "neutral" from "overweight" by J.P. Morgan's Townsend Buckles, who also noted the stock is still a solid long-term play with "Star Wars" slated for release later this year and with the development of an in-home IMAX experience. "We believe drivers of this outperformance include IMAX's growing box office take rates over the last several quarters, its recent success with 'American Sniper' (a last-minute diverse addition to the slate), and the well-received IPO of Wanda Cinemas (IMAX's largest partner in China), which bodes well for the company's own planned IPO of IMAX China," wrote the analyst. The Clint Eastwood-directed "Sniper" was not shot with IMAX cameras and was not slated as an IMAX release until just a week before its Jan. 16 release as buzz surrounding the Bradley Cooper vehicle influenced Warner Bros. and IMAX execs to convert the war film based on a true story. The movie pushed a beaten-up box office to a more than $1 billion domestic take in January, its best performance in five years, according to Box Office Mojo. "American Sniper" is on track to gross over $330 million, which would be second-highest box office take for an R-rated film ever, according to the web site. Read More Buy LinkedIn before earnings: Goldman Shares of IMAX rose to a three-year high of $34.15 before the J.P. Morgan downgrade. The analyst doesn't believe the stock will get much higher than $35, which represents a multiple of 16 times estimated cash flow for 2015. Contrast that with Warner Bros. owner Time Warner, who released "Sniper" and whose shares are up just 9 percent over the last 12 months, trailing IMAX and the S & P 500. Despite the call Thursday, J.P. Morgan sounds optimistic about IMAX over the long term. Disney's Star Wars will be released on IMAX in December. "We also see further upside potential to our estimates from major titles ahead such as Avengers, Furious 7, James Bond and especially Star Wars, which has been partially shot with IMAX cameras," states the note. Read More Hate Yahoo? Still buy the stock: Analyst And in 2013, IMAX formed a joint venture with China's TCL to produce home theaters beginning this year. "Longer term we see potential for meaningful upside from the planned China IPO, as well as the company's in-home initiatives and recently commenced rollout of laser projection. We look for catalysts to raise our earnings and valuation assumptions again more meaningfully (e.g., further film outperformance or China IPO developments) or any notable pullback in shares." IMAX reports earnings on Feb. 19.