Box Office Boom Continues: Theater Stocks to Benefit

The box office boom continues. The top 12 films were up 61%. Led by Hannah Montana The Movie, a reasonable hold Fast and Furious, and good hold for Monsters vs. Aliens, The weekend was the best ever for Easter and the second best ever in April, trailing only last weekend. For years April weekends brought in $70-90 million. The past two weekends were almost summer like with $130 million and $148 million.

Year to date, BoxOfficeMojo.com now shows the box office up 14.6%. The next two weekends were typical $80 million April weekends in 2008 so double digit positive comparisons remain likely.

The first weekend in May is when the comparisons stiffen thanks to the popularity of 2008's Iron Man which opened to $98 million and went on to $318 million.

For the North American theater stocks, including Regal Entertainment (RGC), Cinemark Holdings (CNK), Carmike Cinemas (CKEC), and cinema advertising leader National Cinemedia (NCMI), the box office boom is nothing but good news. Estimates should continue to rise for the group and stock prices will likely follow until summer comps falter or the inevitable flops arrive.

For the studios, it is always a film-by-film issue with profitability through all windows what matters. International box office and DVD volumes are especially crucial.

This past weekend, Disney (DIS) got a much needed boost form Hannah Montana. The studio has been in a slump lately and DIS is the most content driven company in major media given how it moves product through its cable networks, theme parks, and retail stores.

Dreamworks Animation (DWA) got some relief as well with a Monsters vs. Aliens dropping just 31%. The domestic run now looks like it will get close enough to $200 million that it should match analyst estimates. The issue remains overseas where the film is sharply lagging the last DWA films and analyst estimates. I also remain concerned that DVD sales could suffer from the 3-D hype which is can not be duplicated in the home.

Nothing critical from the rest of the studios on the weekend. All are in pretty good shape this year as only Watchmen from Time Warner (TWX) looks like a sizable money loser. Fortunately, the rest of the TWX slate, especially Gran Torino has compensated.

Comments

[Allan Frain:]

Nothing unusual. The movie business can be countercyclical in a downturn as it represents relatively inexpensive entertainment and diversion from reality. It came into its own during the Great Depression.

Apr 14 01:47 PM

[Steve Biren...:]

I believe the box office has countercyclical elements as well, Allan. However, up 15% YTD with consistent strength every weekend is more than trading down entertainment options. Past recessions saw a 1-3% bump. I think that is about the trading down effect this time and the rest is two simple things: Hollywood putting out movies that people want to see and Hollywood no longer looking at the first four months of the year as the time to dump bad product. Every weekend is now viewed as workable for a big opening so higher potential films have been released. Furthermore, ticket buyers have become accustomed to seeing better product on previously slow weekends so they consciously look for new films expecting to see higher profile stuff every weekend.

Apr 14 03:44 PM