Marvel Keeps The Hits Coming

For a company that has had any number of financial issues and shareholder discontent over the years, Marvel (MVL) is certainly banging on all cylinders right now. I can't think of a single company in my portfolio that has seen quite this nice a run of good news of late.

Today, Hasbro (HAS) has blowout earnings, thanks in large part to great sales of licensed Spider Man (and other Marvel character) toys. Marvel had a very strange transition of its toy business from Toy Biz back to Marvel, and then from Marvel to Hasbro as the master license holder for Marvel toys. During the transition, sales were somewhat weak, margins dipped and management guided it lower.

Some investors were nonplussed because MVL management also noted that this new deal with Hasbro had terms that weren't as good as their previous deal. They explained that the new deal was still positive because of the massively broader distribution that Hasbro could provide. It's starting to look like it's playing out exactly how Marvel thought it would, even though it took a couple years of weak toy earnings to get to this point. So the toy business is looking up.

And I wrote a few weeks ago about how encouraged I was about Ghost Rider performing above my expectations - it's now grossed over $220 million globally. That's free money in my calculations, since I didn't expect the flaming skull on a motorcycle to sell that many tickets. It's also a great sign that even smaller profile characters can be made into hugely successful films, even if the critics don't like the movie very much. Get ready for Thor, Namor and Ant Man to test this theory in the coming years.

Then a few days ago, word came out that Spider Man was being developed for Broadway by the Lion King people - crazy, but I don't see any way it could hurt.

And yesterday, news came out that Spider Man 3, the telling of Peter Parker's dark side, is already selling out theaters through advance tickets sales two weeks before it even comes out - far out pacing the last episode. I have no idea if that has any predictive power, but it can't be bad news. People seem to expect that this will be the biggest movie of the year, which means a little lucre for Marvel, and probably, a big boost in toy sales.

The only potential bad news is that this might be Sam Raimi's last Spider Man movie, but I can't imagine Sony and Marvel will let the franchise die. There are plenty of stories out there to make this a never-ending James Bond-style franchise, if they want to do that.

All of this, on top of another big summer movie from the Fantastic Four puts Marvel in great position to have lots of box office credit going into 2008 when Iron Man (stocked to the gills with Oscar nominees) and The Incredible Hulk (Ed Norton? Really? OK!) both hit in early Summer and bring all of their profits straight to Marvel's bottom line.

The shares aren't cheap since they are riding on these nonstop waves of good news. There is now a whole different long-term calculus for the shares going forward - assuming that most of the self-produced movies are profitable - I find the forward PE of 20 or so eminently reasonable. This is a company that I hold for nostalgic reasons as much as financial ones, but my wallet's enjoying it as much as my heart these days.

Disclosure: Author owns MVL.

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