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Bernstein: Lionsgate Is David In A Sea Of Goliaths

Bernstein: Lionsgate Is David In A Sea Of Goliaths

Competitive investment from several larger rivals and economies of scale in the entertainment sector have intensified the playing field for Lions Gate Entertainment Corp (NYSE: LGF.A), according to Bernstein.

The Analyst

Todd Juenger of Bernstein downgraded shares of Lionsgate from Outperform to Market-Perform and lowered the price target from $35 to $30.

The Thesis

In order to maintain upward growth, Lionsgate subsidiary Starz must compete for consumers with Netflix, Inc. (NASDAQ: NFLX), Inc. (NASDAQ: AMZN), Walt Disney Co (NYSE: DIS), Time Warner Inc (NYSE: TWX)'s HBO, Facebook, Inc. (NASDAQ: FB) and Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG), all companies with more resources and capital, Juenger said in a Wednesday note. (See the analyst’s track record here.)

“Starz is competing for consumer attention in a world where Netflix is spending $12 billion (and growing), Amazon is spending $5 billion (and growing) and big companies like Apple, Facebook, and Google are spending, as an experiment, about $1 billion each," Juenger said.

“Nowadays, David is not just fighting one Goliath, he's fighting a gang of them, all at once.”

Additionally, most growth over the past two years has come from the motion picture segment, which grew at an “unsustainable” annual rate of around 32.5 percent, the analyst said.

Juenger is forecasting that this growth rate will decelerate and normalize at half of the current rate. 

Price Action

At the time of publication, shares of Lionsgate were trading down nearly 1 percent at $28.34. 

Related Links:

Blockbuster Q4 Shows Netflix Still Wears The Crown

KeyBanc Pulls Back On Lionsgate Amid Lower Estimates, Poor Visibility

Posted-In: Bernstein Todd JuengerAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga


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