Marvel Entertainment holding up well in Turbulent Markets

It's been a hum-drum year for the Entertainment business as the US economy sputters along, dealing with high oil, housing prices, unemployment and inflation. Even though the big Summer Box Office totals were in line with records set last year, the higher average ticket price was what kept up the pace. There's only so much a Man of Iron and a Dark Knight can do!

One company that has gone against the trend this year has been Marvel Entertainment (MVL). Year-to-date the stock has risen almost 30% on the strength of its first independently financed films. Marvel took a big gamble financing its own movies and so far the endeavor has gone about as well as the company and shareholders could have hoped. The success of the first Iron Man movie, which has now grossed over $570Million at the worldwide box office, has prompted a quick sequel scheduled for 2010, along with a film about another hero, Thor, the same year. Marvel also planned 2 films thus far in 2011, including a Captain America story and a cross-over super hero film about The Avengers, a team which will likely include Iron Man, Thor, Captain America and the star of Marvel's second summer bow The Incredible Hulk.

While Marvel's Hulk didn't capture the same movie-goer enthusiasm as Iron Man, the stigma of the previously panned Hulk film was a tough hurdle to overcome. Nonetheless the film is nearing $250Million at the worldwide box office, and poised to get a 3 version treatment on DVD and Blu-Ray.

While the Christmas season is typically a sales boom for most industry, Marvel is well positioned to capitalize on its fan base, with not only DVD releases of Iron Man and The Incredible Hulk, but also updates to their respective toy lines along with the staple of the company, the comic book publishing and video game licensing business. Marvel has also recently entered into an agreement with Japanese anime studio Madhouse to create a version of the Iron Man story within the anime design guise. This push into International markets, with films and comics, with Marvel at the helm instead of other Licensees, will draw in a much wider fan-base than ever in the company's storied history.

The characters that make up the Marvel Universe are compelling enough to draw interest from Millions around the world, and as Marvel seeks to control more of its own creative domain it also stands to reap the benefits. Marvel's rise over the past year was a direct result of its move into the film business, and with its success established along with 4 other films planned the resulting revenue growth will lead the stock higher in the years to come.

View the full MVL chart at Wikinvest

Marvel will become a dramatic growth story and with a P/E of 17 and a forward P/E of 17 based on next year's earnings of $2/share the stock is certainly not overpriced. Not to mention that these estimates do not yet included the guaranteed success of DVD and Blu-Ray sales for Iron Man and to a lesser extent The Incredible Hulk. With it's main comic book rival DC Comics sitting as a subsidy of Time Warner (TWX), Marvel stands as a pure-play stock in the comic-book publishing and film licensing business. Marvel's only a $2.7Billion market cap company right now, which provides it an attractive platform for growth investors in the coming years as the expansion opportunities ahead of it come to fruition.


But what about 2009? Marvel isn't releasing anything itself! What happens then? The company will continue to ride DVD sales in a manner similar to Dreamworks Animation or Pixar during their 1 film per year business models. Oh and of course the company still sells a lot of comic books and related toys, along with licensing its characters to big movie studios for upcoming pictures such as Lions Gate's Punisher and next year's blockbuster Fox's X-Men: Wolverine. As if the whispers of Spider Man Parts 4 and 5 coming down the pipeline in the coming years wasn't enough.

Are you sold yet?

Disclosure: Author owns MVL

Weekend Market Notes 7/27

It's finally happened for Sirius (SIRI) and XM (XMSR)! The FCC has approved their merger to create a single unified Satellite Radio company. The two firms have to pay a $20Million fine for breaking their FCC promise of never merging, but that's small potatoes when you consider how much these two were paying for exclusive rights to various programming.

Those bidding wars can now end, cost cutting and synergy can begin. For Sirius, there will be share dilution but long term holders should stay positive on the company as this big hurdle has been finally climbed. For XM, holders should be looking at some short term gains as the price of Sirius determines the finaly buyout offer for its counterpart.

Amgen (AMGN) made headlines late friday after test results of an osteoporosis drug met its trial goals. The stock shot up 14% on the news after-hours. It'll be interesting to see if the company can extend its climb or will experience a profit-taking pullback as its earnings are also on tap.

In the Entertainment world, The Dark Knight keeps breaking records and playing to sold out showings in traditional cinemas and IMAX (IMAX) screens. After an estimated $75Million grossing weekend, Batman's haul stands at over $314Million domestically, putting it on tap to be a very profittable film for Time Warner (TWX). With a 10 day trek to reach $300Million some analysts are already eyeing the next $300Million, putting the film on pace to near Titanic's record domestic gross.

Disclosure: Author holds no position in the above mentioned companies

Bright Nights for IMAX and The Dark Knight

While it's true the movie summer session has already produced incredible box office successes with Iron Man and Indiana Jones, the epitome of cinema-fare is yet to come, in the shape of the cape and cowl. By all early accounts Christopher Nolan's The Dark Knight (the sequel to the excellent Batman Begins film) is surpassing even its most lofty cinematic expectations.

Oscar talk for a comic book movie? This genre of film-dom typically rates from the very good (X-Men 2, Spider Man 2, Begins, Iron Man...) to the downright awful (Elektra, Daredevil, Spiderman 3...), but for a movie about a man dressed in a bat costume fighting a villain based on a playing card, to be compared with the greatest sequels in film history. That is something else, and for it to be spoken with realistic ambitions of a Best Picture Oscar nod is not only chilling, but deserves the general movie goer's full attention. From early reviews and viewings, Nolan created a masterpiece with this Batman film, and Heath Ledger's Joker portrayal will be talked about for a generation and then some. Sadly the actor will be unable to reap the praises bestowed upon him as his death months ago from an accidental overdose shocked the entertainment community.

Box Office predictions are enormous for this movie, even more so than Indiana Jones, and with the latter now crossing the $300Million mark domestically and nearing $800Million worldwide, The Dark Knight seems as sure of a thing as there is in this world for a bona-fide hit movie.

The trade here however, is not Time Warner (TWX), the parent of Warner Bros., the studio producing the movie. The trade is IMAX (IMAX). The company whose theater screens fill entire rooms and have sound systems that come as close as any to the ever-lustful "ultimate experience". IMAX is a much smaller company, compared to the giant TWX, $115Million in Revenue in 2007, and therefore can be pushed significantly higher by the success of a single movie.

And yes, studios have released movies on IMAX screens before, why is this different? What makes The Dark Knight bigger and better than any other blockbuster brought to IMAX?
First, it is different because IMAX has more screens now than ever before, and the company, after a rough patch, involving some restatements, seems to be back on track to profitability.
Secondly, The Dark Knight was the first major studio blockbuster to have entire sequences shot with IMAX cameras! Reviews and praise for the film thus far revolve around a few common threads. One, is the sheer film-making achievement that is delivered with this movie. Two, is the incredible performance of Ledger as The Joker. Three, You have to see this film in IMAX!

If that's not enough to drive additional incremental business to IMAX, I'm not sure what is. Shooting movies with IMAX cameras has thus far been reserved to documentary, or special nature-based ilk, as the film is a different size, costs more to use and can only be processed by a specialist laboratory. The final product however, is nothing short of spectacular.

Judging by initial critical praise and the overwhelming response to the IMAX version of the film, it is likely that Dark Knight in IMAX showings will be sold out for several weeks. Shooting a movie of this size, with such a public following in IMAX film with IMAX cameras is not simply an anomaly but is trailblazing and trend-setting. For IMAX shareholders, they can only hope that The Dark Knight's successes with the IMAX experience will foster movie studios to try the format in more feature films, driving an unheard of growth cycle for the company. For now though, it all hinges on Batman, and by all accounts his cape will shroud the entire domestic box office starting July 18th.

With markets sputtering, and catalysts few and far between, IMAX has an enormous catalyst, a beacon of hope for short term gains, as Batman's epic clash with The Joker unfolds on screen, within the IMAX experience.

Disclosure: Author owns IMAX