Investing in Marvel: The Spidey Factor
By Ian L. Cooper
Sure, the third installment of Spiderman banked a cool $148 million. And sure, Q1 profit more than doubled thanks to Spiderman returns. But buying Marvel isn’t part of a smart long-term investment strategy. It’s all about the near-term perceived success of films like Spiderman. The stock runs up ahead of a release and pulls back shortly after the release.
Take a look at what happened to Marvel following the release of the first Spiderman movie. In 2002, after running from $2.50 to more than $6, the stock sold after shortly after the film’s release, falling from about $6 to $3.50. Then, on the June 30, 2004 release of Spiderman 2, the stock tanked from about $20 to less than $13.
And just as we stated in April 17, 2007’s TFN e-News Alert, “We could see the same situation unfold following the 15% jump from about $26 to $30 in recent weeks.” And lo and behold, the stock is pulling back.
Is it an unexplainable phenomenon wreaking havoc on unsuspecting investors? Nah, investors, too, are well aware of the coming doom after this product’s release and opt to short the hype-driven stock for quick gains on the downside. The stock, it seems, has already priced in hype surrounding Spiderman 3.
But it’s just not the pulling of the hype premium that could kill the stock near-term. It’s the competition, too, as Shrek the Third and Pirates of the Caribbean, also sequels, are also slated for May 2007 releases. There are cannibalization fears that the three blockbusters could draw from each other’s audience.
Another downside catalyst for Marvel – the stock is trading at 43 times earnings and seven times sales. This one’s overvalued and ready to pull back.
Take care,
Ian L. Cooper, Editor, Death Cross Trader
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