Why Lions Gate (LGF) Stock Is Surging Today

NEW YORK (TheStreet) -- Shares of Lions Gate Entertainment (LGF) are up 4.52% to $30.03 in pre-market trade after it was reported that the entertainment company and Alibaba Group are teaming up on a subscription streaming service for mainland China that will offer the "Twilight" films, "The Hunger Games: Catching Fire," "Divergent" and "Mad Men," Variety reports.

To be called Lionsgate Entertainment World, the service will be available next month exclusively through Alibaba's latest generation of set-top box. The pricing was not disclosed in the announcement but it's likely to be similar to other SVOD services, Variety said.

The venture moves Alibaba, the Chinese e-commerce and Internet giant, into entertainment content delivery for the first time.

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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 several positive factors, 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 good cash flow from operations, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

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

  • Net operating cash flow has significantly increased by 84.37% to $106.68 million when compared to the same quarter last year. In addition, LIONS GATE ENTERTAINMENT CP has also vastly surpassed the industry average cash flow growth rate of 5.49%.
  • 44.09% 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 6.80% trails the industry average.
  • LGF, with its decline in revenue, underperformed when compared the industry average of 14.6%. Since the same quarter one year prior, revenues slightly dropped by 8.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Media industry and the overall market, LIONS GATE ENTERTAINMENT CP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Although LGF's debt-to-equity ratio of 2.82 is very high, it is currently less than that of the industry average.
  • You can view the full analysis from the report here: LGF Ratings Report

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