UPDATE: Ascendiant Capital Markets Initiates Coverage on Lions Gate Entertainment on Expected Upside Drivers

In a report published Friday, Ascendiant Capital Markets analyst Marla Backer initiated coverage on

with a Buy rating and $40.00 price target. In the report, Ascendiant Capital Markets noted, “LGF is transitioning from ‘mini-major' to major studio, in our view. Yet, even with blockbuster franchises, most LGF titles are the smaller films that were its original mainstay, a strategy that we expect will yield profits on the overall film portfolio. Aided by a better slate combined with lower relative direct and P&A costs, Lionsgate went from (8.4%) adj. EBITDA margin in FY09 to +5.1% in FY10. We believe Hunger Games 2 could drive a 100+bps improvement in FY14. LGF has also improved film profitability by leveraging new platforms including digital, self-distributing in key offshore markets and co-producing.” Lions Gate Entertainment closed on Thursday at $34.58.