David Locke

Marvel Enterprises: The Movie's Just Started

well I really didn't "leave out" the theme park, musical, internet comics, et al; these would be included in what I call "base Marvel" in the valuation section. for 'base Marvel' to keep generating ~$150mm of free cash a year they have to keep coming up with new things in comics, licensing, and new ways to exploit SpiderMan; and IMO this management team has proven that it can in fact find new and different ways to generate licensing income which is what gives me confidence that one can responsibly put a 14-15x multiple on that earnings stream.

Plus frankly all of those things pale in comparison to what Marvel Studios could become in time. I don't think people really appreciate the overall success of the 'superhero' genre of movie. Make a good movie like Dark Knight or Iron Man and you have a billion dollar franchise; make a piece of junk movie like Fantastic Four or the first Hulk and it really doesn't hurt you (at least in terms of lost dollars; there is a lost opportunity cost); presumably because there are giant core fan bases for these films so even a piece of garbage will get enough 'fanboys' (and their protesting girlfriends) through the door to recover its costs.

of course $70 could be a "lowball" projection if everything breaks right; but you have to assume that some of the movies will be duds, and that some of the licensing opportunities won't really pan out. sure, if "SpiderMan-The Musical" has a Producers-like run, if Captain America does Iron Man business and Avengers does LOTR business, if we're all reading comic serials on our iPhones, then yeah $70 will turn out to have been way too conservative. but history shows that, while most of what Marvel does works out, some things don't (like the Incredible Hulk "reboot"). So $70 passes a first-order reasonableness test for me in terms of a central-tendency kind of price target. the "every Marvel management idea turns to gold" price target would certainly be higher than $70, but every stock on planet earth would have a price target of double or triple the current price if that was how one went about analysis.

Cheers