Investors are shedding shares for the summer and if Memorial-weekend box-office receipts are any indicator, the time that they once spent pouring over their portfolio is now enjoyed at the movies. Film attendance is up, way up. Last weekend saw $280 million in sales toppling an alltime record of $255 million and 45 percent beyond last year’s total of $193 million.
With that in mind, investing in entertainment stocks could be a profitable play for the otherwise slow summer months. The trend in higher sales is likely to bolster the Hollywood stocks that have been suffering through the recession. Still well priced after several years of abbreviated attendance, there are a number of film companies that are looking like a buy.
IMAX (IMAX)
3D is on the rise and there seems to be more demand than ever for the technology. Shares of the stock have been climbing since 2009, after the release of James’ Cameron’s 3D epic, Avatar, set a new precedent for 3D. Since then, the companies share prices have multiplied by 9 times from $4 to close to $40 in current trading. Especially impressive, is that despite weakness in the entertainment industry over the past several years, IMAX has continued to impress.
One thing to keep in mind with this company; however, is that recently, there appears to be a disparity for 3D demand and the perception of the demand. Earnings have fallen somewhat this year but share prices climbed 30 percent so far in 2011.
Lions Gate Entertainment (LGF)
Lionsgate, best known for creating cult popular horror movies has been getting a bad rap for a longtime, but things appear to be changing for the studio. Among other things the studio is currently working on The Hunger Games, a dystopian trilogy with a wildly dedicated fan base. The company plans to break the movie into four parts, and tremendous buzz about elements like the films casting and minute details are indicating the movies may help Lionsgate become more profitable again. Their already on the right track. More popular movies early in the year helped to amplify Lions Gate Entertainment’s revenue in the first quarter. Even still, it’s worth of noting that higher costs led to higher net losses.
Revenue was reported at $1.8 billion, a 6 percent improvement on last year, against net losses of $53.6 million. The revenue was in line with analyst expectation while the net losses were less sever than speculation.
That could indicate the stock remains slightly undervalued. Going into summer, the stock looks especially appealing. The fastest accelerating elements of the company was their motion picture department, which saw revenue add 10 percent to $1.23 billion as a result of the popular film “The Expendables,” and other low-budget horror hits.
Box office revenue grew by 48 percent to $205.9 million,
Disney (DIS)
Disney is a media goliath that has extended into a major brand. Between their theme parks and the network ownership of ABC and ESPN, as well as several radio stations, Disney has the benefit of stability via diversification. This summer especially looks good for Disney. The company is expected to see profit growth of 10 percent this year, (despite a first quarter earnings disappointment) and the summer roster may be what takes it there.
