Improving Starz Content Prompts SunTrust To Turn Bullish On Lions Gate

Shares of Lions Gate Entertainment Corp. (NYSE: LGF-A) (NYSE: LGF-B) are likely to move higher over the coming quarters as investors better appreciate Starz's contribution, according to SunTrust.

The Analyst

SunTrust Robinson Humphrey's Matthew Thornton upgraded Lions Gate from Neutral to Buy with a price target lifted from $27 to $31.

The Thesis

Among the most important metrics to monitor for Lions Gate's stock is Starz' subscriber count as the segment accounts for 65 percent of the total segment profit, Thornton said in a note. Encouragingly, a handful of readouts support momentum among Starz's content, including:

A surge in viewership on the app after the release of "Power" season five;

The No. 2 show "Outlander" continues to perform well; and

The launch of Starz's platform on Amazon Prime Video UK and Germany and YouTube TV USA should be followed by more launches with multiple partners worldwide and could add several hundred thousand new subs this fiscal year alone.

The multiple encouraging readouts, coupled with the stock trading in the low $20 level, gives investors a positive set-up in the stock ahead of what should be strengthening Starz subscribers and an ongoing international expansion.

Price Action

Shares of Lions Gate were trading higher by 4.5 percent Thursday.

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