( MVL) stock has soared over the past month on the phenomenal success of its
film, but today's cinematic release of
The Incredible Hulk
could end up a slight disappointment.
, but I believe the stock is more likely to sell off than pop on Monday, when the box office numbers for
I also believe there is a good shot that the stock will be stuck in neutral next week. My thesis this time around is that analyst expectations are too bullish for a film that may very well just meet expectations.
Last time around, Wall Street was too bearish on
, which opened up the window for a profitable time to buy Marvel's stock. Today, there is another good trade in store for investors.
A covered-call strategy could work perfectly here. This is where you own the stock, and sell, or write, calls to collect immediate income. The bet being made is that the stock in the short term will either move lower or stay flat.
Today, most analysts are projecting U.S. box office numbers of $150 million for
, which suggests a $50 million opening weekend. Hollywood Stock Exchange, a reliable online estimator of movie sales, projects $154 million domestic box in the first four weeks.
I believe the stock, at roughly $36 today, is fairly valued, assuming the
grabs that $150 million box.
My film model for Marvel, which uses estimates from the company and Janco Partners research, suggests that if the film generates more than $60 million this weekend, then another 60 cents or so in value is added to Marvel's share price. Essentially, each additional $10 million in domestic box, above the $50 million mark, adds about 60 cents in value.
Longer-term drivers for Marvel will be an expanding multiple, as investors become comfortable with the risk of this new internally-financed film studio business.
But today, a good way to collect some income on Marvel is to sell some covered calls. The June $35 calls are trading around $1.60, up 7 cents in recent trading Friday.
If the stock stays below $37 before the expiration next Friday, the strategy will pay off nicely.
Know What You Own:
Other stocks related to the release of this film include
, whose Universal Studios is the distributor, and
, which is marketing the related action figures.