NEW YORK (TheStreet) -- Lions Gate Entertainment (LGF) shares are diving 6.48% to $38.41 on Friday after the movie studio this morning priced a secondary offering of 3.4 million shares at $39.02 a share.
The offering is expected to be close on or about November 18, the company noted.
This is due to new investments in the company by Liberty Global (LBTYA) and Discovery Communications (DISCA), according to CNBC.com.
Specifically, the units bought 10 million shares of Lions Gate from existing shareholders and each unit entered derivatives transactions for 2.5 million shares each with Bank of America Corp. (BAC), MarketWatch noted.
Based in Santa Monica, CA, Lions Gate Entertainment engages in motion picture production and distribution, television programming and syndication, home entertainment, family entertainment, digital distribution, channel platforms, and international distribution and sales activities.
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 a number of 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 good cash flow from operations, expanding profit margins, solid stock price performance and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has increased to -$137.73 million or 29.48% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 6.51%.
- LIONS GATE ENTERTAINMENT CP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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).
- LGF, with its decline in revenue, underperformed when compared the industry average of 6.7%. Since the same quarter one year prior, revenues fell by 13.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 38.58% 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, LGF's net profit margin of -8.82% significantly underperformed when compared to the industry average.
- 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