J.P. Morgan Reports On Talks With RLD Management

J.P. Morgan is maintaining its Overweight rating on RealD Inc.

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.