Lions Gate Entertainment Corp. (USA) (LGF), Netflix, Inc. (NFLX): An Entertainment Company with an Effective Strategy

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Netflix, Inc. (NASDAQ:NFLX) has already seen success with Lionsgate’s “Orange Is the New Black.” A second season is filming, and a third season on Netflix, Inc. (NASDAQ:NFLX) is likely. Netflix, Inc. (NASDAQ:NFLX) plans on offering future seasons all at once (13 episodes), due to the increased popularity of binge viewing.

Amazon.com, Inc. (NASDAQ:AMZN)’s Prime Instant Video has a multi-year deal with Lionsgate’s EPIX. This deal drove Amazon.com, Inc. (NASDAQ:AMZN) Prime Instant Video content title total over 25,000. However, if you’re attempting to compare the two services of Netflix and Amazon.com, Inc. (NASDAQ:AMZN) Prime Instant Video in regards to popularity, then Netflix wins hands down. Netflix’s subscriber count currently totals approximately 36 million, versus 10 million for Amazon.com, Inc. (NASDAQ:AMZN) Prime Instant Video. If you’re considering these stocks as investments, then you should keep in mind that Netflix and Amazon.com, Inc. (NASDAQ:AMZN) are trading at 82 times earnings and 101 times earnings, respectively. But both are likely to be long-term winners; Netflix thanks to its relentless negotiating to secure top content, and Amazon.com, Inc. (NASDAQ:AMZN) thanks to its top position in online retail.

That said, there’s no sense investing in companies that are trading at outrageous multiples, which could lead to gap downs on unexpected bad news. By investing in Lionsgate, you’re not only investing in the company’s successful strategies to target underserved markets, but the ever-increasing popularity of streaming video. And Lionsgate is only trading at 21 times earnings.

Conclusion

It’s no secret that the stock market’s extraordinary ascent over the past several years is met with some skepticism. If the bears are correct and the market falters, then Lionsgate isn’t likely to hold up well. However, savvy investors realize that external events shouldn’t scare you away from investments in quality companies. If you invest in a quality company at a slow and incremental pace, then downside moves in the stock price can actually be looked at as positives, simply because you will have an opportunity to buy more shares. Lionsgate qualifies as a quality company.

The article An Entertainment Company with an Effective Strategy originally appeared on Fool.com and is written by Dan Moskowitz.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Netflix. The Motley Fool owns shares of Amazon.com and Netflix.

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