BC Business
Here's a prediction: this heavily discounted stock will not behave anything like the index
Lions Gate will be the anchor tenant of New Jersey’s first dedicated movie studio complex in Newark
The stock: The ongoing stock market rout may have you seeking some escapism, some diversion to take your mind off your portfolio’s troubles. One thing that can be said for entertainment stocks like Lions Gate Entertainment (NYSE:LGF.A, LGF.B) is they seldom follow the crowd. Indeed, Hollywood became the world’s entertainment capital during the depths of the Great Depression. With both expenditures and revenues lumpy—movie and television productions need to be financed up front, only to get released a year or more later, with returns highly uncertain—movie studios’ profit cycles don’t correlate to the broad market at all. Right now, that’s a good thing.
The drivers: Mind you, Lions Gate is a lot bigger and more diversified than the indie studio launched by Vancouver mining impresario Frank Giustra in the 1990s. It not only finances and produces film and TV but also owns the Starz streaming platform, electronic gaming franchises, studio real estate, a 17,000-title back catalogue and even themed attractions and live shows. Lionsgate Entertainment World, a theme park, opens this summer in Zhuhai Hengqin, China, not far from Hong Kong.
Though long run operationally out of Santa Monica, the company continues to be formally domiciled in Vancouver, with its financial and legal headquarters on Howe Street. The 2022 fiscal year ended March 31 showed revenues of US$3.6 billion and a net loss attributable to shareholders of US$188 million. Nonetheless CEO Jon Feltheimer described it as “one of our best content-building years as we continue to build significant long-term value.”
The stock has suffered from the glut of content and streaming services in recent years, as well as the failure of theatrical audiences to return to pre-pandemic levels. But at a price of US$8.22 as of Tuesday, it’s trading well below most fair value estimates. Insiders have been buying. And sustained outperformance is no further away than another Hunger Games-like franchise.
Word on the street: Rosenblatt Securities analyst Barton Crocket initiated coverage of LGF.B in April with a “strong buy” rating and a US$19 price target. Morgan Stanley was more measured, maintaining its “hold” rating and US$11 target in late May.
Coming & going: Think the IPO market is dead? Not if you’re Robert Friedland. The U.S.-born, Singapore-based mining promoter launched his latest public company, Ivanhoe Electric (TSX, NYSE:IE), in a $169-million offering June 28. And like other past and present members of the Ivanhoe family, this company exploring for minerals essential to the energy transition (think copper, cobalt and lithium) is based in Vancouver.