"The Avengers" movie was released last Friday and has since become the biggest movie opening in history. The previous record was set by "Harry Potter and the Deathly Hallows Part II," which opened last year with $169 million at the domestic box office. "The Avengers" smashed that record, raking in over $200 million in its opening weekend. So how can you make some money off of its success? Well, here are five stocks whose businesses will benefit from the huge box office take.
Of course the first company to look at would be Marvel Comics. It owns the rights to all the Avengers, including the ones not featured in this particular movie. Marvel was acquired a couple years ago by the Disney (DIS) corporation for $4 billion in cash and stock.
As part of a large corporation like Disney, the effect of this one movie will be somewhat muted. Instead the effect of a big movie like "The Avengers" could change the sentiment at Disney, which ever since the "Cowboys and Aliens" fiasco last year has been cutting the budgets of its potential blockbusters. Production on "The Lone Ranger" was actually halted until producer Jerry Bruckheimer, director Gore Verbinski, star Johnny Depp and others could shave $100 million off the $300 million-plus budget. A huge success like "The Avengers" could raise Disney's confidence and cause it to invest more money into its big budget features.
There are a lot of Marvel Comic themed movies currently in development and that's not including "Avengers 2," which we will no doubt see announced very soon. Some of the Marvel franchises looking to hit the big screen are: "Silver Surfer," "Nick Fury," "Guardians of the Galaxy," "Doctor Strange," "Captain America 2," "Thor 2," "Ironman 3" and "Daredevil 2," and there's still more titles trading on HSX.
To see a significant rise to Disney's stock, the company will have to use "The Avengers" as an excuse to commit resources to developing those other franchises. Because, for every billion dollars that "The Avengers" makes, it only adds at most $0.03 to $0.05 to Disney's bottom line for the quarter. However, the total box office for "Harry Potter and Deathly Hallows Part II" was $1,327,655,619, so it could add up quickly.
Fandango is another example of a company with a huge parent, where a successful film's impact may get lost in the mix. Fandango was owned by NBCUniversal, which was acquired by Comcast (CMCSA) last year. The company sells tickets online and through mobile phones to over 20,000 theaters in the United States. While "The Avengers" release alone will be immaterial to Comcast stock (10Q) it may be a sign of an increase in summer box office. This would benefit Universal Pictures releases of "Battleship," "Snow White and the Huntsman" and "The Bourne Legacy."
According to boxoffice.com total year-to-date ticket sales are $3,577,000,000 compared with $3,138,000,000 for the same time period last year. That represents a $439,000,000 or 14% increase in year-over-year sales. For the weekend of May 4th - 6th the box office took in an estimated $250,000,000, which is an $83,200,000 or 49.8% increase over the same weekend in 2011. In addition to the box office, Comcast's TV and online entertainment businesses will benefit long term through On Demand rentals and TV shows and videos. So any increase in Comcast's stock due to a better-than-expected summer movie season will be slow and measured.
Hasbro (HAS) has a licensing agreement with Marvel and sells Avengers toys. Marvel is also releasing a new "Spiderman" movie in July. In the same month, the new "GI Joe" movie will be released. Both movies have strong product lines from Hasbro, plus this month's release of "Battleship" (Hasbro also distributes the Milton Bradley board game). This summer could bring a significant boost to Hasbro stock.
Hasbro has raised its stock dividend consistently over the past eight years and the stock now pays a solid dividend of $1.44 or about 4%. Marvel was a leader in the boys category, helping to boost that unit's revenue by 4% quarter over quarter. Hasbro is down more than 20% over the past year and is now trading at a P/E of 13. Below the 15.19 P/E of Mattel, Inc. (MAT) and well below LeapFrog's (LF) 21.14 multiple. Hasbro is a cheap stock that should receive a decent rise from this summer movie season.
IMAX (IMAX) theaters provide the ultimate 3D experience for movie goers. For "The Avengers" opening weekend more than 52% of tickets were sold for 3D theaters. IMAX stock has been down recently because of a $0.02 earnings miss, which the company reported on April 27th. So now might be a good entry point into the stock. The company stated in its earnings release it had substantial box office momentum in the first quarter, with gross box office sales up roughly 500% over the same period last year. Now the summer movie season appears like it will continue that momentum.
While Paramount Pictures is another example of a segment with good earnings getting lost in large company [it is owned by Viacom (VIA)], the impact may be larger than others mentioned in this article. Paramount Pictures is a co-producer for "The Avengers." It also has a couple potential blockbusters, which it is promoting heavily on its website, set for release this summer including "Madagascar 3" and "GI Joe: Retaliation."
According to Viacom's latest earnings release revenue at the Paramount segment fell 5 percent in the first quarter of this year as a few of its movies like "A Thousand Words" and "Jeff, Who Lives at Home" bombed at the box office. Despite the lower box office revenue Paramount increased its operating income by lowering its distribution costs. Paramount has been one of the weaker Viacom units, but if the box office momentum continues, it will begin to add more value to what has been a strong stock since the earnings release on May 3rd.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.