Analyst: Elvis Hologram Project Opens up New Growth Potential for Digital Domain

10:12 AM PDT 6/8/2012 by Georg Szalai

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Janney's Tony Wible says the revenue share agreement gives the company more upside opportunity.

Digital Domain Media Group's deal to develop an Elvis Presley hologram will open up new growth opportunities for the visual effects company, an analyst said Friday.

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"We believe this new project will change the growth potential for the new technology as we believe it will be established as a revenue share rather than a one-time payment," Janney Montgomery Scott's Tony Wible wrote in a report.

And he predicted that there would be more to come from the company. "We believe Digital Domain is also working on introducing other entertainment assets," he said without providing further details of his expectations. Asked by THR for his expectations, he said: "Elvis is first, and I think there are three to five [similar deals] in the works...We have speculated that we could see some rock legends."

Overall, the new entertainment business opportunities show "how a core visual effects business can leverage its technology into new areas," said Wible, predicting that the company could also enter the military and medical simulation space.

Reiterating his "buy" rating on Digital Domain, Wible on Friday also raised his fair value estimate on the company's stock by $1 to $10 after raising some financial estimates based on a recent deal the firm struck with Abu Dhabi. It will open a studio in the emirate, which has announced a 30 percent tax incentive for production costs incurred in the country.

"We believe studios will flock to this incentive, especially as the economic pressure in the rest of the world will likely curtail these incentives in many regional economies," Wible argued. "Digital Domain is ideally positioned to help studios monetize this benefit."

As of 12:30pm ET, Digital Domain's stock was up 0.3 percent at $7.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai