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The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.
This biweekly newsletter lists key events in the movie rental and exhibition industries for the period between November 19 and December 2, including notable rental releases, box office figures and recent company-specific news
Movie Rental Industry
Key Redbox releases this year (with domestic box office total in millions from www.boxofficemojo.com):
o 11/20: The Expendables 2 ($85), Abraham Lincoln: Vampire Hunter ($38), Seeking a Friend/End of the World ($7).
o 11/27: Brave ($235), Lawless ($37), Step Up Revolution ($35).
Key Redbox releases last year* (with domestic box office total in millions from www.boxofficemojo.com):
o 11/22: Super 8 ($127), Spy Kids: All the Time in the World ($38), Conan the Barbarian ($21).
o 11/29: Crazy, Stupid, Love. ($83), 30 Minutes or Less ($37), Our Idiot Brother ($25).
*estimated release date
Over the next two weeks, there are two notable rental releases compared to four last year (notable releases are those that grossed over $50 million in domestic box office). We expect DVD rentals for the upcoming two-week period to underperform the comparable period last year, as the four notable releases last year, including Harry Potter and the Deathly Hallows Part 2, totaled over $700 million in domestic box office, compared to ≈ $250 million for this year’s notable releases.
We expect Redbox Instant by Verizon ((NYSE:VZ)) to launch before year end. On November 29, gigaom.com reported leaked details regarding Redbox Instant by Verizon. The website reported pricing at $6 per month for unlimited streaming, and $8 per month for unlimited streaming plus four Redbox credits for DVD rentals each month (that expire each month if unused). The report lists four new titles in the catalog that fall under the EPIX umbrella, suggesting that Verizon will pay a substantial amount for content. While the report notes that the catalog is expected to be smaller than Netflix’s (NASDAQ:NFLX), we expect the new content to be competitive.
Few catalysts remain for continued domestic streaming growth at Netflix. We continue to believe there are few catalysts for continued domestic streaming growth, as Netflix has already converted the vast majority of potential streaming subs on mobile devices, consoles, and smart TVs into paying subs. We also view consensus estimates for domestic earnings power as overly skewed in favor of domestic streaming, which we think generates ≈$1.00/share, and we believe that Netflix’s DVD business (≈$3.00/share) will decline as international expansion (a loss of ≈$4.00/share) continues, making profitability in 2013 unlikely. Despite recent commentary from Carl Icahn, we see few potential strategic acquirers of NFLX, and think the stock is overvalued.
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