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July 17, 2007

Summer Box Office Back On Track

After a weaker than expected June, the summer box office is now on track for an all-time record. With Harry Potter and the Order of the Phoenix opening at the high end of expectations and transformers showing great legs, the weekend box office for the top 12 films was up 14% according to BoxOfficeMojo.com. Since June 29th when Ratatouille opened, the box office is up 12% and the comparisons look favorable for the next four weeks.

For example, this coming weekend will see the opening of Hairspray and I Now Pronounce You Chuck and Larry, two films with the potential to exceed $100 million in domestic box office. Both films could open to $30 million next weekend while Potter earns around $35 million, Transformers pulls in more than $15 million, and Ratatouille earns $10 million. That works out to $120 million for the top five films against $99 million for the same weekend last year. The following weekend brings the highly anticipated The Simpsons Movie with The Bourne Ultimatum and Rush Hour 3 opening on each of the next two weekends.

This is good news for my bullish summer box office thesis and could lead to a nice bounce in the theatre stocks which have pulled back lately while the market has reached new highs. I think the pullback has been driven by the weaker than expected June and the realization that the June quarter estimates for the theatre stocks are too high. Current and projected box office strength should cause investors to look ahead providing a good trading opportunity in Regal Entertainment (RGC). I still think the shares can rise $23-24 this summer which would be a good opportunity to exit the position at a substantial profit and total return.

Posted by Steve Birenberg at July 17, 2007 10:55 AM in Box Office