RealD Shares Popped: What You Need to Know

• Report this Comment On September 28, 2011, at 11:58 AM, bbflyer wrote:

  RealD is printing money both domestically and internationally and has a much more dynamic and powerful business model than IMAX. Consider these facts:

  - Since RLD's IPO in July 2010 the company has done $277MM in revenue and $77MM in EBIDTA.

  - Its systems are installed in over 17,000 screens worldwide in over 60 countries. It has installed over 10,000 screens since its IPO.

  - It is growing much faster than IMAX. RLD's fiscal year (ends March) 2009, 2010, 2011 EBIDTA: $1MM, $22.7MM, $62MM, respectively.

  - It has a much bigger market opportunity because its technology can be installed into any digital silver screen auditorium (note 17,000 screens above). It also has an exciting opportunity for the home with a license deal to launch the RDZ screen with Samsung starting next year. This will be the only true HD passive display on the market.

  - Last quarter (June 11) RLD did $59.6MM in rev, $26.1MM in EBIDTA and $9.7MM GAAP net income. That crushed EBIDTA and GAAP net income estimates but missed on top line rev. Why? Consumers are re-using their glasses overseas because they must purchase them separately which led to the decrease in top line rev. This is actually a good thing because RLD doesn't want to be in the low to zero margin glasses business. The real # to watch is the net license revenue which was $35.7MM for the last quarter a y/y increase of 39%. This is why they were much more profitable and crushed both the EBIDTA and GAAP net income #s.

  - Most analysts are expecting this quarter revenue to be north of $100MM and an EBIDTA in the $35-$45MM range. The company is on its way to doing an EBIDTA of $100MM++ for FY2012 yet it is trading at a market cap of only $575MM.

  - Most if of this years top films both domestically and internationally have been in 3D. Consider the fact that only 10 movies have done more than $1billion worldwide in the box office and 6 of them, the last 6 to do it, have been in 3D: Harry Potter (2011), Transformers 3 (2011), Pirates of the Caribbean 4 (2011), Toy Story 3 (2010), Alice in Wonderland (2010), and of course the #1 movie of all time at $2.8billion: Avatar (2009). Oh yeah, did I mention Smurfs, you know those blue little guys, just passed $500MM worldwide. The Lion King was also re-released in 3D on Sept. 16th and did $30MM opening weekend domestically (expectations were in the low teens) with 92% of its business in 3D and IMAX did not play it. It remained #1 at the BO last weekend despite 4 new movies including the highly anticipated Moneyball. In fact, Dolphin Tale, a new family oriented 3D release, did only $400k less than Moneyball beating expectations, despite competition from the Lion King.

  - 3D is a worldwide phenomenon that is here to stay and RLD is the way to play. The stock is incredibly cheap considering how well the company is doing.

  Disclosure: I am long RLD.

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