IMAX has huge potential; current valuation misses the possibility of a dramatic revenue jump if theaters adopt surge pricing for IMAX events.

The first stock that I'll be highlighting is IMAX. This is one that I found interesting for some time, especially because so many movies now, especially the big ones, are being released in IMAX.

The latest one to be released was The Odyssey, which is going to do over a billion dollars of sales. This movie was shot 100% using IMAX cameras and that is the most important distinction here.

A lot of people view IMAX as just having a square screen or a tall screen and that's not really what IMAX is. To understand what this actual stock is, what the company is, you need to understand what IMAX actually is.

It almost sets a standard, a standard of the way something should be. But in this case, for that standard to exist, it has to be done in IMAX from beginning to end. IMAX is involved in the entire production of an IMAX movie.

For example, Christopher Nolan contacted IMAX saying that they wanted to use IMAX for The Odyssey. This happened years ago. Christopher Nolan also had the release time and he had the exclusivity.

This is why The Odyssey had IMAX and the new Spider-Man didn't. Nolan was first in line. IMAX had made a commitment with Nolan before he started filming the movie itself.

But then from there, you also have to film in a certain style. Most IMAX movies have a portion of the movie, a large part of it, done in IMAX cameras. These are incredibly huge film cameras that capture detail that digital cannot replicate.

It's a more difficult task to film with IMAX, but it captures more detail on the screen.

And this is another big misconception about IMAX. A lot of people think that IMAX simply means that the screen is tall or that the image is more boxy and squared and not widescreen.

But that's not really what IMAX is. IMAX cameras actually collect more detail, meaning that there's more pixels, more resolution on the screen to display more information. So it's not simply taking an image and stretching it to a square image or really tall image.

There's actually just more to show. It collects more data. It can display more on a larger screen while keeping more detail.

So IMAX is bigger cameras, more film, more detail, bigger picture. And it doesn't end there. IMAX also has incredibly detailed and specific standards for audio. For an IMAX auditorium, they have specific details of how the audio must work, how everything must sound.

And in order to ensure a consistent experience whenever somebody goes to any IMAX theater across the globe that they all have the same level of quality of audio quality and visual quality.

IMAX also routinely audits these theaters making sure that they're compliant with all the standards.

Are you starting to see what IMAX is now? This isn't just a stretched screen or a bigger image. IMAX represents the standard of the highest level of viewing a movie. A standard that nobody else so far can match. And this is where the stock gets interesting.

We know that right now IMAX stock has gone up a bit. It's up 40% this year off of the back of these big movies. When you look over the past year it's up 100% and seeing the stock trend up like this may give you the impression that you missed the train or that the stock is overvalued. But that may not be the case.

When we look at IMAX's actual multiples they don't look too bad. It's at a 27 forward PE ratio with a 4 and 1/2% free cash flow yield. It does have some stock-based comp so that takes it down to a normalized 3 and 1/2% free cash flow yield.

But when I look at IMAX I see something that other investors I believe are still missing. IMAX is being priced on its current financials and the current economic of the business as if it's going to continue organically growing how it has previously.

But I believe there's a chance for a dramatic change. And that is that IMAX gets treated less like a movie theater and more like a concert.

If you think about what IMAX represents it changes the movie going experience from going to the movies to now going to an event. When you go to an IMAX movie and you see it on the biggest screen with the biggest sound system in the biggest auditorium you are going to an event.

An event like going to a comedy club or a concert or a ball game.

Events and comedy clubs have surge pricing. They have pricing based on demand. They have flex pricing. So the more demand there is for Taylor Swift tickets the more demand there is for a World Cup game the higher the price is.

All of these companies are doing this except for IMAX. IMAX is a company that still prices their tickets for about $15 to $20 per ticket for a movie that people are lining up for months to see.

People would obviously pay multiples over the price of the ticket that IMAX is charging.

But that's the issue. IMAX can't set the ticket prices, only the theaters can. IMAX is an asset-light business that doesn't own any physical theaters. They simply license their technology, they work with creators, and they audit the theaters to make sure that they're up to standards. But that's where the trouble comes in for IMAX.

And because of that, IMAX is leaving a huge value surplus on the table. Tickets that could be selling for $70 a movie are now selling for $20 a movie. But there's reason to believe that could change.

And just think of the potential here. Right now, IMAX is being priced with steady organic growth, maybe growing revenue by 10% to 15% per year. And it looks like it will accomplish that even with its current pricing structure, simply because the demand for good movies in IMAX has been raised.

And every year, there's more movies coming to IMAX. The next one is going to be Dune 3. After that, they already have movies lined up for 2027 and 2028, and they're even in talks with producers for movies in 2029.

Years into the future, IMAX has signed up deals. They already have organic revenue growth. There's already a resurgence of people interested in this concert-like experience going to an IMAX movie.

And I believe it's only a matter of time until companies like AMC move to surge pricing, to demand-based pricing based on the key IMAX releases. If and when that happens, IMAX's revenue could jump in a single year.

It could go up substantially because those tickets would be worth so much more.

As an example, on the secondary markets like eBay or other websites that you can flip tickets, the first week release of the IMAX 70 mm tickets for Nolan's The Odyssey were going anywhere for $300 to $1,000 per tickets.

This movie went viral on social media. People felt like they needed to see it with IMAX, and many people with deep pockets were willing to pay much more than the standard ticket price.

Now, of course, the tickets being more expensive isn't good for consumers, and I know that many of you may gripe that this is another example of tickets becoming more expensive, but that is the name of the game.

If there is enough demand, companies will eventually match that demand with increased prices. And IMAX has something special that no other company has been able to match. So, even with the price trending upwards, I believe there is huge potential for this company.