Lionsgate roars into Q1 earnings and looking to rattle the cage longterm

Lionsgate reported their Q1 earnings ($LGF.A, $LGF.B), and pulled a fantastic upset by beating not only earnings per share estimates, but also revenue estimates. Reporting after close on August 9th, 2018, Lionsgate beat EPS estimates by $0.02, coming in at $0.18 per share. Revenue was down however year over year (more on that later), but they still brought in $932.7 million, beating estimates by $44.34 million. Quite an impressive feat.

Why Lionsgate can still be king of the jungle

2017 saw a fantastic year of movies for Lionsgate, including fan favorites like John Wick: Chapter 2, and La La Land, which on an estimated $30 million budget, brought in a worldwide gross of $445 million. Not shabby at all. $LGF also has a slate of movies that should do fairly decent at the box office, and have healthy returns based on subject matter.

Looking at a fundamental trading standpoint, Lionsgate trades at 12x Price to Earnings ratio, and a 10x free cash flow. Looking at P/E ratio multiples, and comparing it to industry peers such as Time Warner ($TWX), Walt Disney ($DIS), CBS ($CBS.A), and Cinemark ($CNK), these companies trade between 14.2x and 17.4x, and a solid estimate for $LGF.A would be a 15.8x multiple. If that 15.8x multiple would hold true, then Lionsgate has a price target of $29.30, a 27% upside based on trading end of day on 8/9/18.

Taking Lionsgate valuation and stock value a bit further, a 5 YR Discounted Cash Flow model based on revenue imparts a price target of $33.30, a 44% upside to end of market price on 8/9/18.

Buy Lionsgate, not a ticket to the zoo

Interestingly enough, Lionsgate is one of the few mid-sized companies with a strong portfolio of intellectual property, including the hit premium network Starz. Starz saw a gain of 300,000 subscribers, and television and media networks saw growth in revenue, 7% and 3% respectively.

Grab some popcorn and watch the gains

Lionsgate pays out a decent little dividend of 1.56%, equaling about $0.36 per share. Profit margin still holds at 11.5%, and that only stands to go up as the movies produced start to do better and better.


Updated September 13, 2020

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