Does Marvel's Q4 performance change my opinion of the stock?

Recently, I wrote a piece about my reluctance to believe that Marvel (NYSE: MVL) was necessarily a buy based on an upgrade. Well, Marvel released Q4 earnings this week, and I admit, they were impressive. Net sales were $224 million, and income was 80 cents per share. Both of those numbers more than doubled last year's stats. Expectations were for 71 cents per share for the bottom line.

If you followed the stock at all this week, you may have noticed that shares rallied on Tuesday when the earnings report was issued. Marvel would have made for an excellent trade ahead of the release. But that's all in the past. I have to concede that the performance did make me want to be back in Marvel. I've made money on the stock before, and I do believe in its long-term prospects.

I think the big question now is: Will this deadly market simply be too much for the Marvel bulls? My answer to that question is yes. Of course, I'm not the one who decides what the price action is going to be from this point on. That's the market's collective call. Maybe the shares will begin to trend higher. But I think that buying any stock this year is going to be an exercise in exasperation.

As institutions become more bearish, they won't hesitate to squash any sound thesis. Marvel has a sound thesis: exploit its vast stable of characters via self-financed movies. Take on more risk, take on more reward. While that axiom is attractive, and while Iron Man's DVD release certainly drove the fourth quarter, what about the weak retail environment and its effect on future home-video sales? Take a look at what happened with DreamWorks Animation (NYSE: DWA). The animation studio came in below estimates amidst a challenging home-video sector. Disney (NYSE: DIS), Time Warner (NYSE: TWX), News Corp. (NYSE: NWS), and others are all dealing with declining DVD sales. As negative news stories continue to be filed during the year, highlighting how the recession is getting worse (it's my opinion that the economy will indeed worsen), I have a feeling that the market won't care if Marvel is cheap.

So, I have to reluctantly say that I still don't want to enter Marvel just yet. Maybe, as I've previously stated, if the stock goes below $20 per share, I'll reconsider. Still, I think the earnings were good, and I look forward to future quarters.

Disclosure: I own Disney; positions can change without notice.

Tags: DIS, Disney, dreamworks animation, DreamworksAnimation, DWA, featured, Iron Man, IronMan, Marvel, MVL, news corp., NewsCorp., NWS, time warner, TimeWarner, TWX