Lions Gate Has A Big Weekend Ahead With 'Deepwater Horizon'

Loop Capital’s David W. Miller expects a big weekend for Lions Gate Entertainment Corp. (USA) LGF, with the upcoming opening of "Deepwater Horizon," which is set to hit 4,510 screens across the United States against very little competition.

Miller maintains a Buy rating on the company with a price target of $30.

Box Office Expectations

“While the recent Blair Witch failed to meet our projected ultimates, that film is a sub $5.0 million negative cost project and, at a cume thus far of $27.8 million, will be profitable,” the analyst mentioned.

However, Miller noted that the stakes were higher for "Deepwater Horizon," which has already received very strong reviews and positive word of mouth going into its release on September 30.

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“Given the aforementioned screen count, as well as recent discussions with certain contacts within the exhibitor community, we have 'Deepwater Horizon' opening at $19.0 million, and we are modeling a $58.0 million DBO ultimate, and a $160.0 million GBO ultimate,” the analyst went on to say.

Risks Mitigated

Given the material pre-selling of foreign rights, Miller believes Lions Gate Entertainment should be able to achieve the global box office expectations.

In addition, with private financiers TIK Media and Participants being equity participants in the film, bearing 40 percent of the negative cost, the risk has been mitigated for Lions Gate Entertainment to a large extent.

Miller also pointed out that Peter Berg’s track record was encouraging, given that the past titles directed by him have all been profitable, with no impairments.

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