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FBR: Lions Gate's 'Hunger Games' Opened 'Leaner Than Expected'

FBR: Lions Gate's 'Hunger Games' Opened 'Leaner Than Expected'
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Lions Gate Entertainment Corp. (USA) (NYSE: LGF) third instillation of the Hunger Game franchise "Hunger Games: Mockingjay Part 1" opened on the big screen last week. As the all-important opening-weekend has now concluded, Barton Crockett of FBR & Co commented on the film's expectations.

“Lions Gate's latest Hunger Games sequel opened leaner than we expected domestically,” Crockett wrote in a note to clients on Monday morning. “While this could be a near-term negative for Lions Gate (volatility is typical for studio stocks around franchise openings), we see the impact on estimates as reasonably muted.”

Crockett expects the film to see a total of $346 million in domestic ticket sales, 19 percent less than the prior film "Catching Fire." However, the film is faring better internationally and the analyst is projecting $462 million in ticket sales outside of the United States, 5 percent higher than "Catching Fire."

Crockett notes that Lions Gate is “only” spending $50 million domestically to advertise the movie, a figure that is “substantially” less than previously estimated. The analyst estimates the studio could see profits of over $270 million from the film.

Looking forward, the analyst expects "Mockingjay Part 2" to perform better domestically given it is the final movie in the franchise, thus generating “more urgency” among fans to view the firm.

Bottom line, investors should continue focusing on the studio's television production segment along with a “solid” outlook for the upcoming film slate and demand from non-traditional service providers like Netflix and Alibaba, according to Crockett.

Shares were reiterated with an Outperform rating with an unchanged $40 price target.

Latest Ratings for LGF

Dec 2016B. RileyInitiates Coverage OnBuy
Nov 2016RBC CapitalUpgradesSector PerformOutperform
Oct 2016Morgan StanleyInitiates Coverage OnOverweight

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