Wall Street stays bullish on young-adult franchises
Wall Street has stayed bullish on Lionsgate as the stock hit another all-time high on optimism over its young-adult film franchises.
The stock soared 77¢, or 3.3%, to $24.71 in trading Wednesday following a 23¢ hike on Tuesday in the wake of an aggressive price target hike by analyst Matthew Harrigan of Wunderlich Securities to $28 from $23.
Harrigan cited “rave” exhibitor reviews for its Cinemacon presentation, especially for “Ender’s Game” and “The Hunger Games : Catching Fire” trailer debut. “Ender’s Game” debuts Nov. 1 and “Catching Fire,” with Jennifer Lawrence reprising her role as Katniss Everdeen, opens three weeks later.
He also labeled Lionsgate a TV innovator beyond “Mad Men” and “Anger Management” with its “Orange is the New Black” series in queue for Netflix.
Harrigan said he expects “Catching Fire” to gross $371.3 million domestically, nearly matching the $408 million domestic cume for “The Hunger Games.” He added that international performance should improve markedly over “The Hunger Games,” which grossed $283 million outside the U.S.
“Although ‘Catching Fire’ is not likely to achieve the last ‘Twilight’s’ 64.8% overall foreign contribution to global box office, better overseas marketing with a strong reception last year during discussions at festivals have already bolstered presales,” Harrigan added.
“The Twilight Saga: Breaking Dawn — Part 2” grossed $292 million domestically and $537 million internationally.
The analyst also cited Lionsgate’s “sustainable” production economics and library growth from “Twilight,” “The Hunger Games” and streaming as factors in raising his price target.
Alexia Quadrani at JP Morgan raised her price target last week to $26 a share from $22, citing the slates plus the studio’s efforts to strengthen its capital structure.
“Shares have nicely outperformed the market, up 36% year to date, and we believe more upside is likely, especially on higher estimates as we approach numerous positive catalysts that we believe will demonstrate the breadth of LGF’s TV and film slate and the company’s improved financial position,” she wrote.
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. The stock ran up to $23.92 on March 27 after CBS purchased a 50% stake in the TV Guide Network cabler and TVGuide.com, a deal that leaves the Eye partnering with Lionsgate in the assets.