Invest in These Movie Stocks Before Blockbuster 2015
Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The year 2015 is already shaping up to be the best the movie industry has seen in quite some time. New movies being released in the year 2015 include "The Avengers 2," "Star Wars VII," "Justice League," "Mockingjay: Part 2," and "Avatar 2." This huge potential for movie companies and movie theaters should create several key buying opportunities for investors willing to sit on stocks for long term gains.
Thanks to a $4 billion acquisition of Lucasfilm, Walt Disney (NYSE: DIS) will release the seventh movie in the "Star Wars" franchise. This highly anticipated movie adds to an already promising slate of movies, but now creates two huge blockbusters for Disney. In 2015, the media conglomerate will be releasing "Star Wars VII" and "The Avengers 2." Both of these movies have built in audiences and numerous movies in the franchise to all but guarantee blockbuster success.
"Star Wars VII" will be the first of a planned trilogy from the newly acquired Lucasfilm. Disney will release the movie in 2015 and will hope to see revenue across all of its operating business segments. Disney saw studio revenue decrease to $5.8 billion in fiscal 2012 from $6.4 billion the previous year. This 2012 figure represented only 14% of Disney's total revenue. The launch of several blockbuster movies should help this number rise significantly in 2015. Disney will also generate revenue in other segments like consumer products, television, and parks with "Avengers" and "Star Wars" related merchandise.
The success of the first Avengers movie helped to justify the large acquisition of Marvel by Disney. In the domestic markets, "The Avengers" had box office revenue of $623.4 million. An additional $888.4 million in foreign markets helped bring the total box office to $1.51 billion. The movie ended as the third highest grossing movie of all time in both the United States and the World.
Disney will also be releasing a new "Pirates of the Caribbean" movie, a new Pixar movie in November, and could put out another Marvel related superhero movie. Disney will release two Marvel movies in 2013 and two in 2014, so it seems logical that the company will have something to pair with "The Avengers 2." This could mean a reboot of the "Incredible Hulk" franchise with Mark Ruffalo starring, or could mean a complete new superhero character.
To go along with the superhero genre, Time Warner (NYSE: TWX) is scheduled to release several movies in the popular category as well. The one that should generate the most excitement is "Justice League." "Justice League" will combine DC Comic characters like Superman, Batman, Wonder Woman, and Green Lantern into a movie similar to "The Avengers." The movie will be in theaters during an opposite season of "The Avengers 2" to help alleviate competition in the genre. The success of "The Avengers" and the Batman Dark Knight Trilogy bodes well for this possible franchise move from Time Warner.
In 2009, "Avatar" was finally released in theaters after years of planning and editing by director James Cameron. The movie went on to break the all-time domestic and foreign box office records. The movie, released Dec. 18 2009, grossed $760.5 million domestically and an additional $2.02 billion in international markets. This total box office of $2.78 helped break records for individual theaters and helped IMAX (NYSE: IMAX) break records along the way.
The biggest winner from a successful 2015 box office could be the movie theaters themselves. Large screen movie operator IMAX stands out as a potential breakout candidate in 2015. IMAX has history with several of the blockbusters and their respective studios.
IMAX has shown movies in the "Avatar," "Pirates of the Caribbean," "Avengers," "Batman," "Superman," "Star Wars," and "Hunger Games" franchises. This means IMAX should have no trouble securing the sequels for its large format screens. With 731 theaters (as of 12/31/12) in 53 countries, IMAX clearly has an exciting 2015 ahead of it. The two highest grossing movies on IMAX screens were "Avatar" and "The Avengers."
IMAX is able to charge higher prices for tickets thanks to its unique movie going experience. The company's successful opening of joint ventures also sets the company up to capture additional revenue from concession sales centered around large movie releases. IMAX helps pay for screens up front and is paid a higher percentage of movie related sales. This long term company shift could pay huge dividends for the company and shareholders in 2015.
Cinemark Holdings (NYSE: CNK) operates 5,240 screens in 465 theaters around the world. With 3,916 screens in the United States, Cinemark is the third largest operator. The company has the number one or two market position in 25 of the top 30 United States markets. Cinemark is positioned well for the 2015 movie season with its growing base of theaters and the company's international exposure. Cinemark has 1,324 screens in 13 Latin American countries.
In fiscal 2012, Cinemark was part of a record breaking $10.8 billion movie industry. These record box office results helped Cinemark increase revenue 8.5% to $2.47 billion. The majority of the company's revenue comes from admission tickets ($1.58 billion), which means a successful lineup of 2015 movies could help Cinemark shares hit all time highs.
Regal Entertainment Group (NYSE: RGC) is the largest movie theater operator in the United States with 6,858 screens in 537 theaters. A successful 2015 could help this company, who also saw record revenue in 2012. Regal reported admission revenue of $1.93 billion for fiscal 2012 and continues to see this number climb with higher ticket prices, increases in movie goers, and an increase in theater and screen counts.
I would recommend buying shares of IMAX and Disney as pure plays on a successful 2015 movie theater season. Secondary plays can be made on Cinemark and Regal, as they are sure to see more tickets sold and additional revenue from concessions. Investors will have several opportunities to accumulate shares between now and 2015, but will be left on the sidelines if they don't act soon enough.
Chris Katje holds shares of IMAX. The Motley Fool recommends Imax and Walt Disney. The Motley Fool owns shares of Imax and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!