Looking at Lionsgate


Shares of Lionsgate have risen 5% since the company reported quarterly earnings earlier this month, even though the results disappointed Wall Street. The gains also come in spite of the company's lackluster boxoffice performances of late, including the $10 million opening weekend for "War."

Overall, it seems that in the case of Lionsgate, Wall Street is keeping the positives in focus these days.

"Although the boxoffice has clearly been more difficult for the company, we believe much of the company's valuation relates to its film library, which we do not believe has been similarly underperforming," Wedbush Morgan Securities analyst William Kidd wrote in a recent research report. He reiterated his "buy" rating on Lionsgate shares and his $12 price target.

Oppenheimer & Co. analyst Thomas Eagan also highlighted the good, arguing that while "War" opened "slightly below our $12 million estimate, it should enable Lionsgate to be profitable on the title."

While his price target is under review, he reiterated his "buy" rating, saying "War" "reverses disappointing results" from the studio's last five releases, which "have translated to losses." Eagan estimated that the film will end up making $25 million-$28 million domestically.

Kidd and Eagan both cited the stiff competition from "The Bourne Ultimatum," "Rush Hour 3" and "Superbad." Kidd, who in the run-up to the release slashed his prediction for the Jet Li/Jason Statham film to $30 million from $45 million, also cited "a perceptibly weaker story line than we initially envisioned."

Both of the Wall Street watchers are optimistic about the five remaining Lionsgate films this year.

Kidd says "3:10 to Yuma" and "Good Luck Chuck" show potential for upside boxoffice surprises. He's neutral on "Why Did I Get Married?" and cautious about "Saw IV," at least relative to "Saw III," which topped $80 million. The analyst figures that "Saw IV" will bring in $70 million and be Lionsgate's biggest movie of fiscal 2008. "3:10 to Yuma" will be second at $55 million, followed by "Good Luck Chuck" ($40 million) and "Why Did I Get Married?" ($35 million).

Eagan said Lionsgate is well positioned to achieve the $175 million boxoffice guidance for those five films. He agrees with Kidd that "Chuck" could outperform, but thinks "Yuma" could disappoint "slightly."

Kidd also sees the stock trading at the low end of its range, so he figures it will trend higher from here. He likes the company's strategy of "taking on bigger films," which he says should result in "greater returns."
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