Stock of Lionsgate has pulled back 13% during the past two sessions following its impressive surge over the past two months.
Shares of the studio slid 63 cents Wednesday to $13.59 in active trading of more than 7.3 million shares after a $1.05 decline Tuesday. The issue had jumped 4% on Monday in the wake of the massive launch of “The Hunger Games” after Wall Street’s enthusiasm drove the stock to a record-high close of $15.69 last week.
Evercore Partners analyst Alan Gould, who has a price target of $16, said Wednesday the stock’s decline was due to profit-taking and momentum.
“For these pure play entertainment companies there is always a lot of volatility in the days surrounding their major releases,” Gould said. “Given the strength of the weekend, there is no fundamental reason for the pullback. There was a lot of buying in front of the movie and my speculation is that the latest move is momentum driven, once the stock stopped going up traders decided to sell, and that selling begot more selling. My guess is that the stock should settle down by Monday.”
Earlier this week, Evercore raised its earnings estimate for the current quarter ending March 31 to 13¢ a share from a penny a share due to “The Hunger Games” and homevid revenues from “The Twilight Saga: Breaking Dawn — Part 1.” Gould also said the estimated profits to Lionsgate for all four “Hunger Games” films should be in the $1.35 billion to $1.5 billion range.
Matthew Harrigan, an analyst with Wunderlich Securities, said the stock price decline was attributable to “technical stock behavior” after the run-up. He also noted that the $60 million international opening weekend for “Hunger Games” was “not overwhelming.”
Harrigan, who has a $19 target price, said Lionsgate stock is still attractive over the next 12 months, given the other franchise pics that are coming. “The
hot run makes development and acquisition easier,” he added.
On the heels of the $152.5 million domestic theatrical opening for “The Hunger Games,” the pic’s soundtrack has bowed at No. 1 on the U.S. album chart, according to Nielsen SoundScan figures for the week ended March 25.
The stock has nearly doubled in value since late August, when Lionsgate reached a settlement with Carl Icahn to cash out his 33% position of 44 million shares at $7 a share for about $308 million. The stock is also up 58% since Lionsgate acquired Summit Entertainment on Jan. 13 for $412.5 million.
Scholastic, publisher of Suzanne Collins’ “The Hunger Games” trilogy, disclosed Wednesday that the number of books in print in the U.S. had surged 52% since January from 24 million to 36.5 million — more than 17.5 million copies of “The Hunger Games”; more than 10 million copies of “Catching Fire”; and more than 9 million copies of “Mockingjay.”