Jefferies: Buy Lionsgate, It's A Pure Play On Content

In a report published Wednesday, Jefferies analysts initiated coverage of

with a Buy rating and a price target of $37. Lions Gate's strength lies in its ability to consistently create hit diversified content, strategy of pre-selling the international rights on films and mitigating risk by selling programs across many platforms and to multiple buyers. In the report Jefferies noted, "With audience fragmentation at TV networks increasing, the one constant will be increasing demand and programming costs for the industry; LGF is poised to benefit at both its film and TV segments, while not being subject to the volatility in advertising." The company's film business has performed well over the past seven years largely due to its hit franchises. "While these films have driven earnings upside over that time period, LGF's non-franchise, smaller budget, films, the co's growing TV business, and its vast library are underappreciated, in our view, reducing the company's reliance on "hit" films," the analysts commented. "[Lions Gate's] TV business has secular tailwinds at its back, with increased demand coming from new OTT players, as well as international markets," the analysts pointed out. Lions Gate is expected to perform better than its peers and generate 8 percent EBITDA growth and 11 percent EPS growth over the next three years.