Why 'Wonder Woman' Could Boost Time Warner

Summary

• TWX’s price might benefit from the wonderful box office performance of Warner Brothers’ Wonder Woman movie.
• Warner Brothers never had a movie last year that grossed $1 billion worldwide.
• Wonder Woman could gross $1 billion in ticket sales this year. Its first weekend gross is already at $223 million, $122.5 million of which came from 55 international markets.
• My fearless forecast is that Wonder Woman will beat Kong: Skull Island’s worldwide gross of $565.5 million before June ends.
• Wonder Woman’s worldwide success could help Warner finance more DC superheroes-themed movies.

Warner Bros. was the largest contributor to Time Warner’s (NYSE:TWX) global revenue in FY 2016. This was in spite of Warner Bros. not having a billion-dollar grossing movie last year. Well, Warner’s Wonder Woman movie just did a wonderful opening weekend worldwide gross of $223 million. Domestic gross was $100.5 million, and it took in $122.5 million from 55 other countries.

China contributed $38 million, $8.5 million from South Korea, $8.4 million from Mexico, $8.3 million from Brazil, and $7.3 million from the U.K.

After its first weekend run, Wonder Woman is already the no.18 top-grossing movie of 2017. After three more days, I expect this movie to be among the top-grossing films of 2017. Further, Wonder Woman is the first female hero movie to gain $100 million opening weekend gross. This uniqueness could help it become one of the fastest movies to hit $1 billion in worldwide sales.

(Source: Box Office Mojo)

Wonder Woman’s estimated production budget was $120 million, less than half the $250 million budget of Warner’s Batman v Superman: Dawn of Justice. Wonder Woman’s success this year definitely helps Warner’s bottom line.

My fearless forecast is Wonder Woman will beat the $565.6 million worldwide gross of Warner’s Kong: Skull Island before this month ends. Wonder Woman could even hit the $500 million mark by June 17. The first two weeks’ ticket sales are very important for Time Warner. Movie producers usually take 75-80% of tickets sales during the first two weeks.

Going forward, Wonder Woman could be a billion-dollar grossing film just this year. If this projection proves true, Wonder Woman could save TWX’s anemic +2.75% YTD performance this year.

Barron’s was confident enough to say Wonder Woman could lift TWX’s YTD return to 20% .

(Source: Google Finance)

Barron’s bold forecast is realistic. Warner Bros. accounted for $3.35 billion of Time Warner’s Q1 revenue of $7.74 billion, or 43%. A $1 billion worldwide gross from Wonder Woman could notably increase Warner Bros. topline and bottom line contribution.

(Source: Seeking Alpha)

Produce licensing could further increase Wonder Woman's contribution to Warner's coffers. There’s already several Wonder Woman-themed items for sale online. Walmart (WMT), Mattel (MAT), and Lego are just some of the firms who signed-up as licensees for Wonder Woman toys, clothing, and other goods.

I guesstimate that Warner Bros could earn as much as $100-$200 million in licensing Wonder Woman. There is also the sales from DVD and BlueRay sales. I guesstimate that Wonder Woman will help Warner Bros. contribute $3.8 billion for each remaining quarters of 2017.

Final Thoughts

Warner Bros. contributes more than 40% of Time Warner’s revenue. A hit film like Wonder Woman is definitely a ticker mover. Going long TWX today is a logical bet. Barron’s bullish forecast is believable. TWX could really end 2017 with a 20% YTD return.

The success of Wonder Woman could help finance multiple sequel movies. It could also help finance other DC superheroes-themed movies. The halo effect from Wonder Woman can boost the November film release of Justice League. Wonder Woman is again part of that movie.

(Source: Warner Bros)

Just like Disney’s (DIS) Marvel and Star Wars franchises, Warner has an endless gold mine in DC Entertainment. DC superheroes-themed films are why Warner is only second to Disney when it comes to movie ticket sales.

(Source: The Hollywood Reporter)

Making more DC superheroes-themed movies and TV shows could help TWX improve its weak revenue growth rate. Time Warner’s 3.98% three-year revenue performance is likely because Warner Bros. isn’t churning out billion-dollar grossing movies like Disney did.

(Source: Morningstar)

Analyst’s Disclosure: I am/we are long DIS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.