Analyst says blockbuster success is a longshot
Shares of Lionsgate have jumped to another all-time high despite an analyst sounding a rare note of caution about one of upcoming sci-fi pic “Ender’s Game.”
The stock rose 3.17%, up 89 cents to $28.95 in trading Tuesday following a price target upgrade from Matthew Harrigan of Wunderlich Securities from $28 to $34 and Doug Creutz of Cowen & Co. increasing his quarterly earnings estimate to 47 cents a share from 37 cents for the fourth quarter ended March 31. It was the latest in a string of Wall Street upgrades fueled by confidence that Lionsgate can replicate the success of the first “The Hunger Games” movie and the “Twilight” franchise.
Creutz also noted that Lionsgate has two potential franchise starters launching in the current fiscal year which could add “meaningful” multi-year earnings power: “Divergent,” launching March 21, and “Ender’s Game,” opening Nov. 1 starring Asa Butterfield and Harrison Ford. A cult favorite among teen boys and young men since its publication in 1985, it’s been described as “Star Wars meets Harry Potter.”
“While the book on which the film is based is a classic of the genre, we think the film remains a bit of a longshot to achieve breakout success (which we would define as a domestic box office in excess of $125 million) due to some potentially challenging subject matter,” he added.
Creutz did not elaborate, but in the original novel by Orson Scott Card, the lead character is manipulated as a child into unknowingly committing genocide against an entire sentient species.
Harrigan said in his report that “Ender’s Game” has “distinct fanboy and likely general audience appeal” with Lionsgate possibly responsible for 10% to 15% of the production cost. He also noted Lionsgate has rights to all 12 of Card’s “Ender’s Game” series, adding that not all of them are readily adaptable for film.
The stock has doubled in price this year and more than tripled its $8.60 price when Lionsgate acquired Summit for $412.5 million in January, 2012. Lionsgate announced at Cannes last week that it had generated $250 million in foreign sales at the market for nine upcoming titles, including the final two movies in the “Hunger Games” franchise.
“The Hunger Games: Catching Fire” opens Nov. 22. Lionsgate is set to release its quarterly earnings report after the market closes on Thursday.