Cautious Optimism for Marvel Entertainment (MVL)

Marvel Entertainment (MVL) gave the street a reason to breathe a little sigh of relief with this morning's earnings (see MVL's conference call transcript). They reported more or less what was expected for 2005 results, but boosted their guidance a little bit thanks to their large share repurchase program.

EPS should now come in between 44 and 55 cents, their previous guidance in the last conference call was for 37 to 52 cents.

Now, neither one of those numbers is really impressing anyone -- at $16 you're still looking at an awfully high PE for a company that is expected to have a very weak year.

But the stock is up about 10% as I type this, partly because they raised guidance for this year and largely, I think, because people are now starting to think about 2007. The short term mentality of Wall Street would have allowed us to buy into Marvel's expected blockbuster 2007 at very low prices in 2005 ... no surprise there, of course.

This year, Marvel's stock may ebb and flow with their licensed feature films, but now the fact that 2007 should be a great year for them is starting to get some attention -- Spiderman 3 will be out that year among other expected solid films, their new toy contract goes into effect, and they'll be providing us by then with some stronger visibility into the casting and stories for their first few self-produced films moving forward through 2008. CNNMoney ran an article on this potential as well recently, which probably reflects this new tide of cautious optimism for Marvel that's playing out in force today.

To be honest, I was hoping that they would continue to downplay 2006 -- which will see an Xmen film and could be much more successful than we're guessing. I would like to own a little more Marvel, and I'll be looking for depressed prices later this year to get a chance to buy in before the good news for 2007 and beyond really gets priced in.

MVL 1-yr Chart