Somebody invite Ebert and Roper over for some popcorn and ridiculously expensive candy because its time to analyze some movie industry stocks. Yes, you’ll laugh. You’ll cry. Who knows? You might even buy some shares.
While there is not a true pure-play movie company out there to covet for a stock market Oscar, each of the businesses below earn more than their share of the box office bonanza. So, quiet on the set! It’s time to raise the curtain on some movie company stocks to see if they are recession-busting blockbusters or big screen bombs.
Sony Corp. (SNE)
SNAPSHOT: Sony stretches its tentacles far and wide with businesses spanning the electronics, video game, entertainment and financial services sectors.
* Before you even get to the silver screen, Sony produces a laundry list of products for investors to love: PlayStation, Hi-Def TVs, computers, Blu-ray, digital cameras and a heckuva lot more. This kind of diversity gives them a shield in case one of their movies winds up as a super flop.
* Sony’s revenues are the thing of rave reviews from the toughest of critics-$88 billion for the fiscal year ending March 31.
* While Sony doesn’t have a guaranteed box office smash in its pipeline this summer, it’s got a solid lineup that’s sure to entertain and perhaps become a word-of-mouth hit: "Hancock" with Will Smith; "You Don’t Mess with the Zohan" starring Adam Sandler; and "Step Brothers" featuring Will Ferrell.
* The company still owns a 50% stake in BMG Music Entertainment. With free and inexpensive downloads out there, the record industry has flopped in recent years, especially with declining demand.
* Even though Sony has a nice line-up for the summer movie season, several box office disappointments, along with less than perfect sales numbers for its TVs and PlayStations could make Wall Street yell, "Cut!"
* Sony shares have gone the way of a down and out actor whose agent can’t even land him a lunch date with a B-movie director-falling 14% over the past year. This is nearly double the decline of the S&P 500, which has tumbled 7.5% over the past 52 weeks.
Carmike Cinemas (CKEC)
SNAPSHOT: Carmike Cinemas is a motion picture theatre owner in small and mid-size markets. It owns 69 theatres, leases 193 theatres, and shares ownership in two others, for a total of nearly 2,350 screens.
* Recessions have traditionally been as sweet to theatre owners as a box of candy. People like to escape their sorrows through the magic of Tinseltown. Of course, it helps to have an all-star lineup of potential summertime windfalls. The latest "Indiana Jones," "Wall-E," "Iron Man" and other blockbusters will likely keep theaters packed.
* A new wave of 3-D movies will feature incredibly advanced technology. The industry is sold on next-gen 3-D movies as something that is going to be a cash cow. Of course, the reviews from the critics will be, um, critical.
* Carmike’s stock has been on an absolute tear since February, having jumped an IMAX-sized 117%. That’s a lot of popcorn folks!
* The company lost more than $10 a share last year. There are not enough special effects experts in Hollywood to hide that kind of financial disaster.
* Carmike is expected to lose another 64 cents a share in 2008. Still, that is an impressive career-saving comeback after last year’s implosion.
* While the company met analyst’s expectations of a loss of 34 cents in the past quarter, check out last year’s debacle, which ranged from a miss of -57% to a miss of -7,616%. Do not adjust your 3-D glasses, you read it right!
Regal Entertainment Group (RGC)
SNAPSHOT: Regal Entertainment Group is the nation’s largest theatre owner, with 6,385 screens at 525 theatres in mostly mid-sized and suburban markets. In addition to Regal Cinemas, the company also owns United Artists and Edwards.
* For your consideration…Regal Cinemas pays an impressive 6.8% dividend to shareholders. That type of return gets two thumbs up from me.
* Regal has partnered with IMAX on a joint venture that will bring new digital IMAX screens to 38 Regal Cinemas for a total of 58 such theatres by 2010. The first digital screens are supposed to raise the curtain in time for the new "Harry Potter and the Half-Blood Prince: The Imax Experience" movie late this Fall.
* In addition to its extensive IMAX theatre reach, Regal is unveiling the aforementioned new 3-D technology at 1,500 of its screens, which positions the company to profit nicely from the upcoming 3-D revolution. So, Regal is rolling out the red carpet to give IMAX and 3-D theatre goers the royal treatment.
* Since peaking in February, Regal’s shares have plummeted some 18% and have recently set a 52-week low. Yet, some look at drops like this one as opportunities to discover unknown winners on Wall Street.
* Acquisitions typically are a drain on earnings and stock prices if you are the buyer. Regal just bought Consolidated Theatres for $210 million in cash. Granted, they did not incur any debt, which was a savvy move by the producer and director.
* While growth this year is expected to be a four-star caliber 14%, it is supposed to be cut in half next year, say the pundits. When growth slows, the effect does not bode well for the bottom line.
Michael Abramowitz is a freelance writer based in Florida. To avoid conflict of interest, he does not currently own any of the stocks mentioned above.
Price quotes are from June 13, 2008.
© 2008, Young Money Media, LLC