Inside Wall Street
GOING OUT ON A LIMB--FOR SPIDERMAN?
Lizbeth Barron, one of the hottest entertainment stock pickers around, hasn't been shy about sending a strong sell signal on such biggies as Time Warner, Paramount, and Disney, even when the crowd is going the other way. And neither has she held back on bullish calls when she thought shares were ripe for the picking. These days, the S.G. Warburg & Co. vice-president is negative on Paramount, wary of Time Warner, cool toward Disney. What does she like? Marvel Entertainment Group, which hasn't got many analysts marveling.
The bears have been heavily shorting Marvel, the nation's largest creator and publisher of comic books and other illustrated action material. About 3.9 million shares, or more than one-third of the company's 10 million-share float, have been sold short. The bears argue that Marvel, which leaped from 17 a share in late February to 28 3/4 on May 25, will plunge before long.
The shorts contend that the popularity of comic books is on the wane. So Marvel, they say, can't maintain rapid growth. They also say Marvel overpaid when it shelled out $265 million for Fleer, a leading sports-card marketer, since that business has peaked, too.
Such claims don't faze Barron, who has just raised her 1994 Marvel estimate to $1.35 a share from $1.30, vs. $1.05 for 1993. In 1995, she expects $1.65. Marvel earned 66 in 1992.
COMIC ROCK. Barron believes that the shorts will bite the dust. "Over the past four months, Marvel has experienced the highest unit and dollar sales volume in its history as the market for its products expanded rapidly," says Barron. The comic-book business' near-term prospects "continue to be quite strong," says Barron, and should enable Marvel "to meet our second-quarter estimate of 26 a share," vs. 15 a year ago. She thinks her 1993 and 1994 forecasts are on the low side because management indicates that it's possible for sales to jump 30% in 1993.
Barron notes that Marvel will embark on new businesses to enhance its core operations, including a television series with such Marvel characters as Spiderman and X-Men, as well as videogames. Marvel also plans to publish a line of illustrated kids sports magazines, rock 'n' roll comic books, and comics for the Japanese and Taiwanese markets. The $8 billion Japanese comic-book market dwarfs the $1 billion U.S. market, notes Barron.
Barron predicts that over the next two years, Marvel stock will hit 45, based on the company's 25% growth rate. New York financier Ron Perelman recently raised his stake in Marvel from 60% to 80% in a tender offer.GENE G. MARCIAL