Investors Have ‘Hunger’ for Lions Gate: Analyst
Special to CNBC.com
“The Hunger Games” brought a lot of people into movie theaters and made a lot of money for both its production company, Lions Gate Entertainment, and the theaters themselves, two analysts told CNBC Monday.
The teen dystopian saga, the first part of a trilogy, had a massive openingweekend, earning $214 million in its global debut, $155 million in the U.S. and Canada. JPMorgan Chase media analyst Monica DiCenso told CNBC that gross will have an immediate impact on Lions Gate’s fiscal first quarter.
“We’re very excited about the results this weekend,” she said. “Even if you strip out what ‘The Hunger Games’ has done, the company has a very stable outlook going forward and that’s why we continue to like shares here.”
DiCenso, with an $18 price target on the stock, wants to see how well the movie does in its second weekend in release.
“We’re looking for $70 million in domestic box office. If it can exceed that you’re talking about a film that hits $400 million in domestic (business), which probably raises estimates a bit and makes the story more interesting,” she said. “We’re looking for $1.5 billion in profits from this franchise to Lions Gate over the next few years. That could be conservative.”
She likes that the company makes movies that are relatively low-cost — “The Hunger Games” had a budget of $80 million — and everything above that “goes straight to the bottom line.” It also has a pipeline of movies that lend themselves to franchises and downstream video sales.
Then there is television. Lions Gate’s “Mad Men” was back on AMC Sunday for the first time in 17 months. Television makes up 22 percent of Lions Gate’s revenue and there are more shows to come, including bad boy Charlie Sheen’s “Anger Management.”
“It’s an interesting time when you dig into the details of this company,” she said.
It’s also an interesting time to be a movie theater company. In a separate interview, Lazard Capital Markets analyst Barton Crockett said “The Hunger Games” certainly gave the theaters a lift, but “the most important part of the second quarter is leading into the July 4 weekend.”
“There’s a bear argument that people don’t want to go to the movies anymore. Movies like ‘The Hunger Games’ show people still have the movie habit,” he said.
His picks are Cinemark Holdings, which pays a 4 percent dividend and has "a better growth story anchored in Latin America and in the U.S.," and Regal Entertainment Group, which pays a 5 percent to 6 percent dividend.
Additional News: ‘The Hunger Games’ Has $214 Million Global Debut
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Monica DiCenso does not own shares of Lions Gate, but the company is an investment banking client of JPMorgan. Neither Barton Crockett nor his company own shares of Cinemark or Regal Entertainment.