Evercore analyst raises price target, citing film slate
Wall Street’s bullishness on Lionsgate has lifted the stock to another all-time high on optimism over its young-adult film franchises.
The stock rose 35¢, or 1.4%, to $25.16 in trading Wednesday in the wake of an aggressive price target hike by analyst Alan Gould of Evercore to $30 from $24.
Gould also raised his earnings per share estimate for the quarter ended March 31 to 48 cents from 42 cents based on strong new film results, the homevid release of the final “Twilight” and the availability of “The Hunger Games” in the pay TV window.
“The film lineup looks strong led by ‘Catching Fire’ in late November, currently projected to be the second highest grossing film in 2013 by HSX.com at $373 million during its first 4-weeks,” Gould said in his report. “Other key upcoming films are ‘Red 2’ starring Bruce Willis in July, ‘Ender’s Game’ starring Harrison Ford in November and ‘Divergent,’ another hot young adult book about a dystopian society being released next March.”
He also said the company will exceed its $900 million 3-year EBITDA guidance, particularly due to the estimated $50 million in debt extinguishment costs in this fiscal year and next.
“The company could be debt free within three years and we anticipate annualized savings of over $20 million from the refinancing of its $436 million of senior notes in November,” he added.
Gould also said more “Twilight” films are likely. “Given the open-ended conclusion of Twilight 5 and the modest performance of author Stephanie Meyer’s ‘The Host’ ($25 million box office on a $40 million production budget, released by Open Road Films) we would anticipate that she will likely write more Twilight books,” he added.
The stock is now trading at more than triple its price of $7 a share in late August 2011, when the company bought out Carl Icahn’s 33% stake for $309 million. Lionsgate stock rose about 20% to $8.60 before it bought Summit Entertainment — originator of the “Twilight” franchise — for $412.5 million in January 2012.
The company’s most recent earnings report easily topped Wall Street estimates thanks to the final “Twilight” film with earnings of $37.8 million, or 28¢ a share, on revenues of $743.6 million and cash flow of $87.2 million for its third quarter ended Dec. 31.
The stock has reached more than a dozen record-high closes so far this year.