Barrington Research Upgrades RealD As It Explores 'Strategic Alternatives'

Barrington Research raised its rating on RealD (NYSE: RLD) Tuesday to from Market Perform Outperform and established a $15 price target.

Analyst James C. Goss made the upgrade following news that the company is “exploring strategic alternatives.”

Michael V. Lewis, Chairman and Chief Executive Officer of RealD, said in a press release, “While the operational and financial actions we have taken [over the past 18 months] are beginning to show results, we believe that a full review of strategic alternatives will allow us to determine the best path forward for RealD and our shareholders.”

The company reported a narrower than expected Q3 loss per share of $0.23 but well below the $0.01 loss reported in the prior year period. The loss reflected a “year‐over‐year reduction in box office results for 3D films,” according to Goss.

Goss noted, however, that product revenues and gross margins have improved along with licensing revenues. Management had guided that licensing revenues would come in at a steady rate of 4.5 percent of the box office generated on RealD showings. However, the actual range has been 4.6 to 6.2 percent which indicates “the figures are well above this level in the year to date.”

The analyst note concluded that a “fundamental improvement in profitability” will be realized over the next several quarters from an improved slate of films. In addition the the fundamental picture, “the strategic evaluation will provide an added support” for the stock.

RealD recently traded at $12.14, up 10.06 percent.