Is Lions Gate A 'Mini Disney'?

Lions Gate Entertainment Corp. (USA) LGF reported a fiscal first quarter 2016 adjusted EPS of $0.26, higher than the Street estimates. Sales arrived at $408.9 million.

Some investors might have expected this report to attract new buyers, but Wall Street wasn't overly impressed. The stock closed down 5.57 percent Thursday and continued to tumble after hours. Shares of Lions Gate were down about 1 percent in Friday's pre-market session.

"This is sort of a miniature version of Disney," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga. "I remember when the stock was an $8 to $11 stock not that long ago."

Udall noted that Lions Gate has risen significantly since that time. The growth started in 2012 when the firm "got some momentum going," thanks entirely to "The Hunger Games" franchise. One clever investor used social media to bank on the film's potential.

"There was a point in time when 'The Hunger Games' was simply a book that Lions Gate had licensed," Chris Camillo, a self-directed investor and author of "Laughing at Wall Street," told Benzinga in February 2014. "That book was getting tremendous traction on the social Web, especially with the young female audience, but also the young male audience. There was an opportunity at that time when Lions Gate was a $7 to $12 stock to realize that they had come across probably one of the most important media properties of this decade."

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"The Hunger Games" franchise will conclude this November. Investors have hoped the "Divergent" trilogy could replace it, but those films have not been nearly as profitable.

"It's a hit-based company, like all media companies," said Udall. "They don't really have a lot of growth right now. This market is nasty. If you're not coming out with results that are exceedingly impressive, it's hard to keep the stock up right now."

Udall said that he thinks Lions Gate has had a "growth problem" for a while now.

"And until they figure out the problem, I think the stock is going to struggle," he added. "I don't know what their next hit is going to be. I don't really see another one on the horizon."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Image Credit: Mike Mozart, Flickr