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Marvel Enterprises
Re: Finally '03 earning & 4th quarter

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By japruf
February 10, 2004

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I don't think MVL intends to preannounce as they have in previous quarters. Some might think this is a bad sign. But, I very much doubt it. Some very reliable posters on Yahoo have MVL's earnings at twice the forecast (32 cents per share verses 16 cents per share). These fellows have hit estimates right on target for the last few quarters. I think they might be a tad bit low this quarter.

Guidance for 04 will be conservative (they always lowball). The people who really know MVL also know that 04 AND 05 will be stellar years for the company. A few of the highlights coming up this year:

MVL becomes debt-free on June 20th paying off with cash their one remaining loan. By that date MVL will have accumulated at least 100 million of cash above what they will use to pay the debt (probably much more).

The movie Punisher will be released in April. Marvel has a percentage of the gross, the best kind of deal (far better than previous deals. The movie is an action thriller R rated flick starring John Travolta, Thomas Jane, and Rebecca Ramijn-Stmaos.

The release of Spiderman 2 is scheduled for the first week in July. Marvel's take of the box is capped at I think 5%. They will reap enormous franchising revenues for the film. They could do better on the box depending on outcome of SONY litigation.

MVL's two other releases are Blade 3 Trinity in August, and Manthing around Halloween. It's hard to gage the possibilities of these two. The Blade series has a pretty sizable following and could do 100M worldwide. Early words on Man Thing are positive.

The difficult thing to gage about this stock is the difference between reality and perception. In reality MVL is growing at a rapid pace as a solid licensing company with very low overhead and high margins. Perception is another thing. Last year the stock swooned over the perception that MVL suffered when The HULK wasn't a smashing success at the box office. In reality, due to phenomenal licensing, Hulk was a tremendous financial boon for MVL.

At the end of the summer a Hedge fund hack named Roberts was quoted in Barron's with some negative, and incorrect, info about MVL. Again the stock went down. His negative comments were perceived by some as doom for MVL. The reality is that his misinformation and misgivings have been proven to be a bunch of bull, nothing but spin. Again, perception verses reality. Gradually MVL's stock price recovered.

Another ridiculous misperception occurred at the last earnings announcement when some of the press releases mentioned the "bad" news that Toy sales were down. A few writers stated this as if it was a failure by MVL. If they had looked beneath the numbers they would have realized that MVL was no longer listing much of their toy revenue under toys sales. It was included in the licensing category that showed phenomenal increase. Again the confusion caused churning in the stock rather than a huge uptick deserved by marvelous numbers. Some of this is probably due to huge short interest in the stock (currently at 8.9 million shares). These guys are vested only in downward movement of the stock.

So, there will no doubt be more of the same this year. However, MVL's management seems to be getting more and more savvy when it comes to information and spin. The analyst meeting in December laid out a very rational, and promising revenue stream for the foreseeable future. Institutional buying has increased dramatically since then (currently at 67% of float).

Technical Analysis of MVL reveals a strong base on base formation that has transpired during the past 3 and 1/2 months (since Late OCT.). The price has stayed in the 25 to 35 range while shaking out weak hands, and picking up institutional players. A good sign during the consolidation period was that most positive jumps were on high volume, while most downward movement occurred with low volume. The stock is poised on the brink of its 50 day moving average with stout support at 29/30 at the bottom of a well defined upward sloping channel. The top of the channel is around 38. Look for MVL to hit that shortly after earnings.

Back to your original question: why no earnings preview. My answer is that MVL is very confident knowing the stock price will hold at around the current level (29/32). Then, patiently and professionally they will annihilate earnings estimates on March 2nd and send Marvel into orbit. Notice they are announcing before the bell, and early in the week. Fasten your seat belts. That sort of run-up could instigate a short squeeze that could send the price even higher.

Pruf


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