Outside of young tech firms like Pixar and satellite radio, the concept of a high-growth entertainment company seems like an oxymoron on Wall Street.
Particularly in the film and TV business, fortunes tend to vary depending on slates, and major congloms have seen their stocks rise or fall no more than 20% this year.
Lions Gate stands out on any list of public media companies, with its stock up 140% for the year. Its earnings have been a similar success story in 2004, as the company finally went into the black with a healthy profit of $8.3 million in the last quarter, based in large part in a surge in box office revenue from “Fahrenheit 9/11” and “Open Water.”
Company’s also predicting it will end the current fiscal year for the first time ever with a healthy profit.
Of course, with a market cap of around $1 billion, Lions Gate is still a fraction of the size of any major media congloms, but its growth potential and surging stock makes it the kind of company investors love and rarely find in media.
The big questions mark on Lions Gate’s books for a while had been the heavy debt it was carrying, largely due to its $160 million acquisition of Artisan.
But company recently began raising between $125 million and $150 million that it is already using to pay down its nearly $350 million in debt.
The only problem, some on Wall Street say, may be that continued growth is already built into Lions Gate’s stock price, meaning good performance will only meet expectations and a mistake could scare investors off.
Lions Gate is trying to address that by selling itself to Wall Street based in large part on its recurring revenue base from its large homevideo library that it exploits domestically and overseas. That helps to temper the potential damage a major box office flop could have, although small budgets mean Lions Gate shareholders will never have to deal with something on the scale of “The Alamo.”
CEO Jon Feltheimer told a group of institutional investors at a recent conference: “When people say, ‘What should we look for from Lions Gate?,’ I tell them the most important thing to look for is consistency.”