Theater Stocks Are Having a Blockbuster Year
The likes of Netflix, HBOGo, VideoOnDemand, and free and easy downloading of content from the Internet were all supposed to spell doom for the brick and mortar movie theater, right?
Not so fast. The performance of the movie industry this year indicates that the demise of the box office has been far overblown. With studio hits like The Avengers, Men in Black 3, and Snow White and the Huntsman all bringing in major business to movies houses across the country, year-to-date box office sales are up a remarkable 16.5% over 2011, posting the strongest ticket sales in six years. With large-scale productions like The Amazing Spiderman and The Dark Night Rises due out this summer, and literary hits like The Hobbit and The Great Gatsby set to hit screens before the holiday season, one would expect the strong earnings trend to continue.
The rebound in the industry has been reflected in stock prices and has been noticed by international investors as well. Regal Entertainment, the largest movie chain in the United States, has seen its stock price rise 20% in 2012, far outperforming all benchmarks. Additionally, just yesterday The Wanda Group, the largest theater developer in China, announced plans to spend $2.6 billion to purchase AMC, the second largest chain in the United States, and an additional $500 million to improve its theater-going experience.
Although all indications point to strong performance continuing through the year, now may not be the time to invest in the movie industry as assets have already experienced a recent and rapid increase in value. However, theater companies deserve credit for turning things like social media into effective tools for marketing their products; they have emerged as a relatively cheap outlet for family entertainment during still uncertain economic times. This year has proved that movie-going is alive and well, and any projections to the contrary were premature.
Business section: Investing ideas
Do you think movie theater stocks have more upside to price in? Or simply want to keep track of the key players? Here's a list of stocks that stand to benefit (or have already fully benefited) from this year's blockbusters.
As mentioned previously, movie theaters are very dependent on box-office hits, so be warned that a less successful 2012 can mean a bit slump from current valuations. (Click here to access free, interactive tools to analyze these ideas.)
List compiled by Rebecca Lipman:
1. Carmike Cinemas: Operates as a motion picture exhibitors in the United States. Market cap at $237.14M, most recent closing price at $13.39.
2. Cinemark Holdings: And its subsidiaries engage in the motion picture exhibition business. Market cap at $2.54B, most recent closing price at $22.15.
3. DreamWorks Animation SKG (NYS: DWA) : Engages in the development, production, and exploitation of animated feature films and characters worldwide. Market cap at $1.44B, most recent closing price at $17.15.
4. Lions Gate Entertainment (NYS: LGF) : Engages in the motion picture production and distribution, television programming and syndication, home entertainment, family entertainment, new channel platforms, and digital distribution activities. Market cap at $1.82B, most recent closing price at $12.66.
5. Reading International: Engages in the development, ownership, and operation of entertainment and real property assets in the United States, Australia, and New Zealand. Market cap at $137.45M, most recent closing price at $5.61.
6. Rentrak: Provides content measurement and analytical services to companies in the entertainment industry. Market cap at $173.26M, most recent closing price at $15.68.
7. REGAL ENTERTAINMENT GROUP: Operates a theatre circuit in the United States. Market cap at $2.03B, most recent closing price at $13.09.
8. RealD (NYS: RLD) : Licenses stereoscopic three-dimensional or 3D technologies internationally. Market cap at $614.25M, most recent closing price at $11.25.
9. IMAX (NAS: IMAX) : Operates as an entertainment technology company worldwide. Market cap at $1.32B, most recent closing price at $20.10.
10. Walt Disney (NYS: DIS) : Operates as an entertainment company worldwide. Market cap at $79.36B, most recent closing price at $44.40.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Daniel Connelly and Rebecca Lipman do not own any of the shares mentioned above. Data sourced from Finviz.
At the time this
article was published The Motley Fool owns shares of Walt Disney. Motley Fool newsletter services have recommended buying shares of IMAX, DreamWorks Animation SKG, and Walt Disney. The Motley Fool has a disclosure policy.
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