Looking for Netflix (NFLX) Alternative? Try This Stock...
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Regal Entertainment (NYSE: RGC) shares are rather nimble today, following a bullish article in Barron's that labels the nations largest cinema operator as stiff competition to Netflix (Nasdaq: NFLX).
Barron's notes that current short interest on the stock is at about 28 percent of float, meaning a lot of people are looking for Regal to continue its decline. The stock is down about 17 percent over the last 12-months, compared with a 120 percent gain for Netflix.
But the eternal question remains, comments Barron's, of "what is different this time?" Cable didn't kill theaters in the 80's, so why will video-on-demand do it this time.
Regal's main business isn't selling tickets. As anyone who jokes about going to the movies knows, you have to "take out a second mortgage" for that box of Sno-Caps. Regal thrives on selling high margin items like soft drinks and popcorn. The sales make Regal a bit of a cash cow, with EBITDA estimated at $503 million this year, and $546 million next year.
Shareholders also get a dividend of 84 cents per share annually, yielding 6.9 percent at today's trading range. Barron's contends that Regal isn't in acquisition mode, considering that most of the large U.S. markets are saturated, making it relatively reliable to cash flow.
But the casualties have already been counted, with Blockbuster going bust last year (Dish Networks (NYSE: DISH) won a bidding war for the company in April). The brick-and-mortar buildings still stand, but are likely to be consolidated as Coinstar's (Nasdaq: CSTR) Redbox offerings continue to swell.
With revs dropping 22 percent last quarter, fears were certainly raised. However, comps may have been unfair as moviegoers flocked to see Avatar and Alice in Wonderland, both in 3-D, and both big hits. The movie selection in 2011 hasn't been there so far, though Cars 2 may provide a boost for Regal moving forward.
Ticket sales still account for the lion's share of revs, 69 percent at last quarter, but like Netflix, the cost of running those movies is going higher and higher. The company spent $200 million to rent film and advertise show times last quarter.
Comparable, Regal spent just $20 million for popcorn and other concessions. It's cost basis in the quarter was just 14 percent of sales, not bad work if you can get it.
Concerns might surround the balance sheet, it's current ratio is 0.63 and there's nearly $2 billion of long-term debt to be handled. Likewise, Netflix has a current ratio of 1.47 and about $200 million of long-term debt
So, if you're looking for an alternative to Netflix $265 per share price, at $12.25 and healthy dividend, Regal just may be a 'feature' in your portfolio.
Shares are up 0.5 percent on the session.
Barron's notes that current short interest on the stock is at about 28 percent of float, meaning a lot of people are looking for Regal to continue its decline. The stock is down about 17 percent over the last 12-months, compared with a 120 percent gain for Netflix.
But the eternal question remains, comments Barron's, of "what is different this time?" Cable didn't kill theaters in the 80's, so why will video-on-demand do it this time.
Regal's main business isn't selling tickets. As anyone who jokes about going to the movies knows, you have to "take out a second mortgage" for that box of Sno-Caps. Regal thrives on selling high margin items like soft drinks and popcorn. The sales make Regal a bit of a cash cow, with EBITDA estimated at $503 million this year, and $546 million next year.
Shareholders also get a dividend of 84 cents per share annually, yielding 6.9 percent at today's trading range. Barron's contends that Regal isn't in acquisition mode, considering that most of the large U.S. markets are saturated, making it relatively reliable to cash flow.
But the casualties have already been counted, with Blockbuster going bust last year (Dish Networks (NYSE: DISH) won a bidding war for the company in April). The brick-and-mortar buildings still stand, but are likely to be consolidated as Coinstar's (Nasdaq: CSTR) Redbox offerings continue to swell.
With revs dropping 22 percent last quarter, fears were certainly raised. However, comps may have been unfair as moviegoers flocked to see Avatar and Alice in Wonderland, both in 3-D, and both big hits. The movie selection in 2011 hasn't been there so far, though Cars 2 may provide a boost for Regal moving forward.
Ticket sales still account for the lion's share of revs, 69 percent at last quarter, but like Netflix, the cost of running those movies is going higher and higher. The company spent $200 million to rent film and advertise show times last quarter.
Comparable, Regal spent just $20 million for popcorn and other concessions. It's cost basis in the quarter was just 14 percent of sales, not bad work if you can get it.
Concerns might surround the balance sheet, it's current ratio is 0.63 and there's nearly $2 billion of long-term debt to be handled. Likewise, Netflix has a current ratio of 1.47 and about $200 million of long-term debt
So, if you're looking for an alternative to Netflix $265 per share price, at $12.25 and healthy dividend, Regal just may be a 'feature' in your portfolio.
Shares are up 0.5 percent on the session.
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