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Macquarie Analyst On Lionsgate: 'Everyone Wants It'

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In a report published Friday, Macquarie analyst Amy Yong initiated coverage of Lions Gate Entertainment Corp. (USA) (NYSE: LGF) with an Outperform rating and a price target of $45.

“Everything changes except great content. As content mercenaries, management has an insatiable appetite for seeking out avenues of growth with a low risk, high return discipline,” analyst Amy Yong wrote. This financial disciple by the management had “translated into tremendous free cash flow potential.” Yong expects Lions Gate to generate a 3-year CAGR of revenue, EBITDA and FCF of 8 percent, 11 percent and 20 percent till FY18.

The analyst projected the company’s EBITDA at $1.26bn, towards the high end of the management’s guidance. The Macquarie report stated that this projected was based on the following:

  1. No visible earnings cliff - Yong pointed out that Mockingjay 2, Allegiant and Now You See Me 2 were expected to outperform box-office expectations, while Power Rangers, The Odyssey and The Hunger Games were not included in the guidance.
  2. More windows, more platforms – “On-demand, SVOD, and emerging platforms are carving out a significant opportunity to grow its high-quality TV business,” the analyst said.
  3. Little things add up in a big way – Lions Gate’s library of content, location-based entertainment, own distribution in the UK and notable JVs that expand the company’s footprint into LatAm and Asia could be the “areas of incremental growth,” the report added.

Latest Ratings for LGF

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

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Posted-In: MacquarieAnalyst Color Initiation Analyst Ratings


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