Wall Street Hot For 3D Provider RealD, But Analysts Question Long-Term Prospects

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 told Bloomberg. “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.”

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