Amid record year, analyst Matthew Harrigan ups buy rating to $23

Lionsgate stock, which has set eight record highs this year, has received an 21% boost its its price target from Wall Street analyst Matthew Harrigan of Wunderlich Securities.

Harrigan, who carries a buy rating, to $23 from $19, citing confidence for a sustainable operating cash flow near $200 million annually from the library along with a trio of upsides for the studio — new franchise development with “Divergent,” “Chaos Walking” and “Ender’s Game”; continued leadership in digital media as exemplified at CES; and rapid deleveraging and lower interest expense.

The stock was off 28 cents to $18.04 a share in late trading Friday. The issue is still up 10% for 2013 and is more than double the price when Lionsgate bought Summit a year ago.

The analyst said the company is poised to benefit from initiatives such as Walmart-owned Vudu’s disc to digital effort.

Harrigan noted that Lionsgate has “majority economics” on the $110 millions “Ender’s Game,” which opens Nov. 1, three weeks ahead of “Hunger Games: Catching Fire,” which should see a higer international gross than “Hunger Games.” “Divergent,” which opens in March, 2014, has already sold over 2.5 million books, similar to “Hunger Games” at a comparable point, he noted.

He also said Lionsgate should deliver “doubles and triples” from its film slate including “Warm Bodies” on Feb. 1, “Now You See Me” (June 7) and “Red 2″ (Aug. 2) following and three Tyler Perry movies — “A Madea Christmas” (Dec. 13), “Temptation” (March 29) and “We the Peeples” (May 10). Other Lionsgate films include “You’re Next” (Aug 23) and a service deal on “I, Frankenstein” (Sept. 13).

Sales for the third quarter ended Dec. 31 should be up 133.6% to $754.7 million and EBITDA should triple to $52.4 million from $16.2 million, Harrigan said.

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