Judging by last weekend's blowout box-office results, it appears that the American movie-going public is back with the vengeance of a slasher-movie sequel.
According to reports, Memorial Day box-office receipts totaled some $280 million easily topping the previous record of $255 million set in the pre-recession 2007. This year's Memorial Day movie sales marked a whopping 45% jump over the 2010 total of just $193 million for the holiday weekend.
This trend is good news for movie makers and cinema operators alike, who had been suffering from a steady downward spiral in attendance. And believe it or not, this movie momentum can be good for investors, too, if they play the right summer movie stocks.
Here are 5 hot Hollywood investments to capitalize on what could be an upward trend in the theater business this summer:
IMAX Corp. (IMAX)
The surge is simple: IMAX technology is in big demand, both with consumers who have become more receptive to 3-D films in the wake of 2009 blockbuster "Avatar" as well as with theaters and studios who know pricier 3-D tickets are a great way to prop up their balance sheets. Shares of IMAX have rallied over 30% year to date in 2011 and the run could continue with a strong summer movie season as Americans head back to the theaters. Read about 50 "real" American stocks on InvestorPlace.com.
Though earnings disappointed recently, keep in mind that IMAX was being compared to record results driven by "Avatar" in 2010. While a blockbuster on that level may be a tall order, the fact that this stock saw strength even as the rest of Hollywood suffered is a good sign it will lead the charge back to the box office this year as the movie biz improves overall.
An interesting play on the summer movie surge is National CineMedia (NCMI)
While movies suffered and attendance declined, obviously there was less appeal for CineMedia services. NCMI stock suffered, as evidenced by the company's underperformance in 2010 and quarterly loss in its latest earnings report. Shares are off almost 10% year to date, however the prospect of higher ad sales and more movie traffic could mean this stock is a decent bargain buy.
What's more, with a dividend yield of almost 4.5% you have incentive to shoulder the risk of CineMedia and see what it can do over the next several months.
Surprised to see a dividend stock like National CineMedia in the movie biz? Well here's another: Cinemark Holdings Inc. (CNK)
The current yield on Cinemark stock is about 3.8%, with its 21-cent payout scheduled for July, a hefty 17% increase over the 18 cents it paid the previous quarter. Seeing as there is little competition in most markets, it makes sense that movie theaters are a reliable revenue stream and a source of reliable dividend payouts. Read about 10 top dividend stocks to buy now on InvestorPlace.com.
Cinemark has surged over 35% in the last year, significantly outperforming the market, and has tacked on an impressive 25% in the last six months alone. The theater operator has topped Wall Street EPS targets by over 50% in three of the last four quarters and continues to be highly profitable. That's in part because of growth and acquisitions to offset overall traffic declines most recently it announced plans to buy a 12-screen cinema in South Carolina to bolster operations.
This growth even amid dark times for the movie biz puts Cinemark in a great position to profit once box-office receipts boom. Once movie-goers return en masse, these investments will pay off for CNK stock.
Thanks to "Pirates of the Caribbean: On Stranger Tides" and comic-book movie "Thor," starring Natalie Portman and Anthony Hopkins, Disney (DIS)
Of course, Disney did just miss Wall Street earnings targets. But it's encouraging that despite the shortfall in its fiscal second-quarter 2011 results, Disney eked out a 2% earnings increase overall.
And longer term the profit trajectory of Disney is strongly upwards. Full-year revenue for 2010 was up 5% over the previous year, topping pre-recession levels, and is projected to grow by another 10% in 2011. What's more, profits are projected to leap by as much as 35% this fiscal year.
Of course, with a $78 billion company like Disney there is a lot to pay attention to outside the box office, from its resort and cruise attendance to ad sales on its TV properties to merchandising and videogame sales. Read about three video game powerhouses waiting to go public on InvestorPlace.com.
But if Disney gets it right with its movies, all other related businesses tend to get a lift too.
If you can't dream big when talking about movie stocks, when can you? That's why my final movie pick is an aggressive call in much-maligned Dreamworks (DWA)
Dreamworks has flopped over 30% since November, briefly bottoming out at a 52-week low of about $23. Its "MegaMind" feature failed to meet lofty expectations; a poor reception for its latest "Shrek" offering caused many investors to wonder if the studio has lost its mojo with family-friendly offerings. To top it off, "Kung Fu Panda 2" took in just $68 million at the box office through Memorial Day, short of most estimates. That prompted the sell-off that pushed Dreamworks to a new low.
But while franchise fatigue is certainly a risk for Dreamworks don't expect much from yet another tired Shrek-related title this fall with "Puss in Boots" it's hard to believe that this creative studio founded by Steven Spielberg is fading to black. The company is safely profitable, and has plenty of prospects in the works.
If you want an aggressive bet that could pay off big-time over the next year or two, jump into Dreamworks as it bottoms out this summer. If "Kung Fu Panda 2" makes up lost ground thanks to overall strength in box office sales, it could offset a weak opening and jump-start the stock. What's more, if you believe in the studios new titles for the next year or two that include "Rise of the Guardians," "The Croods," "Turbo" and "Me and My Shadow," you're better off buying in now before any prerelease hype bids up DWA stock.
Of course, there's also a pretty good chance that Dreamworks could prove its critics right and be dead money for the next year or two. So tread lightly.