Wall Street Analysts Laud Opening for Summit's 'Divergent'

 Summit Entertainment

TORONTO -- Summit Entertainment's Divergent coasting to a $56 million opening weekend fell just shy of the $60 million opening-weekend forecast by a slew of Wall Street observers.

But Matthew Harrigan, an analyst with Wunderlich Securities, on Monday reiterated his $43 price target and a buy rating for Lionsgate shares as he sees "the stock as the best play on improving digital economics for the movie business as well as YA (young adult) franchise creation."

Evercore analyst Alan Gould echoed his peers in pointing to strong fan ratings for Divergent, which stars Shailene Woodley in the title role, and stressed that the film bucked a trend of recent YA targeted flops from rival studios, such as Beautiful Creatures, The Mortal Instruments: City of Bones, Vampire Academy and Warm Bodies.

And that's enough to justify lucrative sequels for Summit/Lionsgate's latest YA movie property.

"We think Divergent can safely be presumed to having launched a new three to four picture franchise benefiting earnings through FY17 or FY18," Gould predicted.

The $56 million opening weekend tally for Divergent fell well short of a $64 million forecast from Eric Handler of MKM Partners.

But the box office analyst pointed to positives like "solid word of mouth" and higher-than-expected premium Imax ticket sales to indicate Divergent should have legs at the multiplex in the coming weeks.

All eyes will also be on the market opening for Lionsgate stock on Monday after shares in the mini-studio slid 8 percent on Friday to $27.60.

Evercore's Gould predicted a rebound in Lionsgate stock.

"We think the Monday stock drop typical of movie companies after key releases already occurred last week and expect the opposite -- that the stock should rise on Monday, perhaps making up all the lost ground from Friday," he wrote in a report.

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