Lions Gate Entertainment Corp. (LGF) Earnings: Boffo With Blockbusters

Big Dog Competition

Lions Gate with only a $2 billion market cap is a very small fish in the Hollywood pond surrounded by major entertainment mega caps like The Walt Disney Company (NYSE: DIS), Sony Corporation (ADR) (NYSE:SNE), and Comcast Corporation (NASDAQ: CMCSA).

Comcast, whose Universal Pictures came out with “Identity Thief” which has already made back its budget earning $36 million this last weekend and “Mama” a horror flick that competes against Lions Gate’s horror stable is more of a competitor to Lions Gate than the rest of these. It has a widely varied offering of films from Oscar contenders like Les Miserables to adult comedies like “Identity Thief”. However, buying Comcast stock on the basis of entertainment revenues wouldn’t be prudent as it is still considered a cable/telecom although it doesn’t have the higher yields like Verizon and AT&T. It reports on February 13 and is trading at a 17.64 P/E and has a 1.70% yield.

Naturally enough Disney films caters to the 12 and unders (and the parent who has to accompany them) but they generally make up only 15% of moviegoers.  Then Disney makes more money from its DVDs and on demand sales. For the cost of the entertainment division in Disney stock it’s like you get the resorts and licensing for free. Disney trades at a 17.66 P/E and has a 1.40% yield. Disney, of course, is not as dependent on film as Lions Gate but both of these should be seen as content providers in a world where “content is king.”

Seen in that light Lions Gate has an even brighter future and analysts expect 26.40% five year EPS growth. After that great earnings release analysts should be coming out with upgrades and initiations of coverage.

The Last Reel

Lions Gate should still be considered a speculative stock but one with a real gameplan in place and blockbusters left in their young adult pipeline. The teenage moviegoer demographic is one they really understand and their secondary revenues from the video library and television should be growing in the years to come. Lions Gate is a good piece to fit into any speculative opening in a portfolio.

The article Lions Gate Earnings: Boffo With Blockbusters originally appeared on Fool.com and is written by AnnaLisa Kraft.