Lions Gate Entertainment (LGF) Stock Advances on Media Partnerships

Lions Gate Entertainment (LGF) stock is climbing in early afternoon trading on Tuesday, after partnering with Liberty Global (LBTYA) and Discovery Communications (DISCA).
By Rachel Graf ,

NEW YORK (TheStreet) -- Lions Gate Entertainment (LGF) stock is gaining by 4.39% to $39.96 in early afternoon trading on Tuesday, after the company announced that Liberty Global (LBTYA)and Discovery Communications (DISCA) will each take a 3.4% stake in the international cable company. 

Media companies Liberty Global and Discovery Communications each will pay about $195 million to purchase 5 million shares of Lionsgate. 

Both companies will appoint a member to Lionsgate's board of directors. Liberty Global will appoint CEO Mike Fries, while Discovery Communications will appoint CEO David Zaslav. 

"This transaction aligns Lionsgate with two of the most visionary players in the global marketplace, and we're delighted to add David and Mike's experience and expertise to our Board of Directors," Lionsgate CEO Jon Feltheimer and Vice Chairman Michael Burns said in a statement. "We believe that this agreement creates tremendous strategic opportunities to grow our content initiatives around the world and positions us to generate significant incremental value for our shareholders."

Separately, TheStreet Ratings team rates LIONS GATE ENTERTAINMENT CP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

We rate LIONS GATE ENTERTAINMENT CP (LGF) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins, notable return on equity and solid stock price performance. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • LIONS GATE ENTERTAINMENT CP's earnings per share declined by 13.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LIONS GATE ENTERTAINMENT CP increased its bottom line by earning $1.24 versus $1.02 in the prior year. This year, the market expects an improvement in earnings ($1.50 versus $1.24).
  • 43.68% is the gross profit margin for LIONS GATE ENTERTAINMENT CP which we consider to be strong. Regardless of LGF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.94% trails the industry average.
  • LGF, with its decline in revenue, underperformed when compared the industry average of 6.5%. Since the same quarter one year prior, revenues slightly dropped by 9.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and the Media industry average. The net income has decreased by 6.0% when compared to the same quarter one year ago, dropping from $43.26 million to $40.68 million.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: LGF

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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