One Guy's Investments: Hits Keep Coming for Marvel (MVL)

For a company that has had any number of financial issues and shareholder discontent over the years, Marvel (MVL) is certainly banging on all cylinders right now. I can't think of a single company in my portfolio that has seen quite this nice a run of good news of late:

Today, Hasbro has blowout earnings ... thanks in large part to great sales of licensed Spider Man (and other Marvel character) toys. Marvel had a very strange transition of its toy business from Toy Biz back to Marvel, and then from Marvel to Hasbro as the master license holder for Marvel toys. During the transition, sales were somewhat weak and margins dipped and management guided lower ... and some investors were nonplussed because MVL management also noted that this new deal with Hasbro had terms that weren't as good as their previous deal. They explained that the new deal was still positive because of the massively broader distribution that Hasbro could provide, and it's starting to look like that's playing out exactly how Marvel thought it would ... even though it took a couple years of weak toy earnings to get to this point. So the toy business is looking up.

And I wrote a few weeks ago about how encouraged I was about Ghost Rider performing above my expectations -- it's now over $220 million in global box office. That's free money in my calculations, since I didn't expect the flaming skull on a motorcycle to sell that many tickets ... and it's also a great sign that even smaller profile characters can be made into hugely successful films ... even if the critics don't much like the movie. Get ready for Thor, Namor and Ant Man to test this theory in the coming years.

Then a few days ago, word came out that Spider Man was being developed for Broadway by the Lion King people -- crazy, but I don't see any way it could hurt.

And today, news comes out that Spider Man 3, the telling of Peter Parker's dark side, is already selling out theaters on advance tickets two weeks before it even comes out. Advance ticket sales are far outpacing the last episode .... and I have no idea if that has any predictive power, but it can't be bad news. People seem to expect that this will be the biggest movie of the year, which means a little lucre for Marvel and, probably, a big boost in toy sales. The only potential bad news is that this might be Sam Raimi's last Spider Man movie, but I can't imagine Sony and Marvel will let the franchise die ... there are plenty of stories out there to make this a never-ending James Bond-style franchise if they want to do that.

All this on top of another big summer movie from the Fantastic Four puts Marvel in great position to have lots of box office cred going into 2008 when Iron Man (stocked to the gills with oscar nominees) and The Incredible Hulk (Ed Norton? Really? OK) both hit in early Summer and bring all their profits straight to Marvel's bottom line ... the shares aren't cheap, riding as they are on these nonstop waves of good news, but with a whole different long-term calculus for the shares going forward -- assuming that most of the self-produced movies are profitable -- I find the forward PE of 20 or so eminently reasonable. This is a company that I hold for nostalgic reasons as much as financial ones, but my wallet's enjoying it as much as my heart these days.

Labels: MVL