B. Riley says the disappointing box office performance of "Blair Witch" could pressure the brokerage/consensus second quarter estimates of Lions Gate Entertainment Corp. (USA) LGF. However, B. Riley maintained its Buy rating on the stock as it remains bullish on the company's fundamentals.
"[W]e would use any weakness in LGF shares to add to positions as we still remain positive on the potential for upside EBITDA this year (consensus is at the midpoint of guidance and RILY is above consensus) as well as the benefits of the proposed Starz combination (that should drive impressive cash operating/tax synergies of $200MM+ annually)," analyst Eric Wold wrote in a note.
"Blair Witch" opened with a disappointing $9.7 million and a D+ CinemaScore, suggesting that the film is unlikely to reach the consensus box office estimate of $32.8 million (RILY was at $55.0 million).
Wold noted that unlike last year, Lions Gate film slate is diversified this year and isn't dependent on any one blockbuster film/franchise.
That said, analyst said there could be downward revisions to second quarter estimates in the coming weeks given the weak opening for Blair Witch coupled with lower-than-expected quarter-to-date results heading into this weekend.
Wold expects second quarter revenue of $593 million, which remains above the consensus estimate of $565 million.
At time of writing, shares of Lions Gate fell 3.84 percent to $20.76. Wold has a $34 price target on shares.
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