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Time Warner: Impact of Latest Harry Potter Film on Stock

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Trefis ) -- Warner Brothers, Time Warner's (TWX - Get Report) movie entertainment arm, is going to launch part 2 of Harry Potter and the Deathly Hollows in 3D during 2011. We take this opportunity to estimate the value of such movies from Time Warner's perspective. Time Warner competes with Viacom (VIA), News Corp (NWS), CBS (CBS) and Disney (DIS) in the media and entertainment business.

Our price estimate for Time Warner's stock stands at $35.51, in line with market price.

Success of Part 1

Harry Potter and the Deathly Hollows Part 1 earned global box office revenues of close to $950 million, with 31% coming from the U.S. box office and the remaining 69% coming from the international box office. This suggests that this movie alone accounted for a good portion of Time Warner's annual box office revenues. We should note that, since the movie launched in late 2010 and remained in theaters into 2011, the revenues cited above are spread across both years.

Looking Ahead to Part 2

With the expected launch of part 2 in 2011, the year is shaping up nicely for Time Warner's movie arm. Since 3D movies often have ticket prices about $3 higher than regular movies, the company get an added boost to revenues.

With a successful theater run for part 2, Time Warner can gain both domestic and global box office market share. We estimate that Warner Brothers is the most important division for Time Warner, representing about 35% of the company's stock value. We include the company's box office business within this arm, and estimate that box office operations single-handedly generate 12% of Time Warner's stock value.

While a slight uptick in box office market share for 2011 alone is immaterial, the company's stock value could see real upside if these market share gains can be sustained over the long-term. You can drag the trend line in the interactive charts above to see how changes to Time Warner's box office market share outlook can affect the company's stock value. See our full analysis for Time Warner here

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