J.P. Morgan Reports On Talks With RLD Management

J.P. Morgan is maintaining its Overweight rating on RealD Inc. (NYSE: RLD) after talking with the company's management yesterday.

In the report, J.P. Morgan writes, “We connected with RLD management yesterday for details regarding the FY12 exhibitor licensing margin outlook of 72-75%. Management confirmed our understanding that the margin outlook assumes a licensing fixed-cost base of about $45 million, implying exhibitor licensing growth of 17-32% in FY12. In our view, based on discussions with investors, the stock sold off 13% on Friday (S&P500 down 1.4%), in part owing to the mistaken assumption that direct costs were equal to depreciation only, a smaller cost basis that yields a lower implied royalty growth rate (or y/y decline at 72% gross margin). Maintain Overweight.”

RLD closed at $20.90 yesterday.