M+E Daily
Wall Street Hot For 3D Provider RealD, But Analysts Question Long-Term Prospects
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Shares of 3D technology company RealD gained more than 30 percent from the company’s initial public offering pricing yesterday, even as analysts debated the long-term challenges ahead of both the company and the stereoscopic medium in theaters.
BusinessWeek reports that of the 12.5 million total shares offered, 6.5 million came from private-equity funds and other owners. The high number of owner sales was enough to give Chapwood Capital analyst Ed Butowsky pause.
“I’m surprised they’re going public when they are,” Butowsky . “Half of the shares are being sold by existing shareholders – that bothers me.” Butowsky added that the company was losing money; indeed, RealD reported a net loss of $51 million for its fiscal year ended March 26, 2010 (via RTTNews).
Meanwhile, BTIG Research (which has a Sell rating on the RealD stock) points out that the company — presuming it sticks to its current business model of licensing projectors to movie theaters — “requires continued strength in 3D attendance” if it is to succeed over the long term.
BTIG’s current estimates for the company assume that 3D attendance as a percentage of overall US movie attendance will increase from 15% in 2010 to 35% in 2014. However, the research firm says, “we have a hard time believing that more than 1 out of every three attendees of a movie in a few years will be for a 3D film and worry that 35% of attendance could still be too high.”
